WHAT HAPPENS IF THE COST TO BUILD A HOME EXCEEDS THE CONTRACT PRICE?

Luxury Homes and Estates in Florida, October 2006

There has been an explosion of home building in Central Florida. Builders often execute contracts for homes that will not be built and closed until over a year passes. The contract price is frozen, however, a cost spiral fueled by oil price increases and competition for raw materials with foreign countries and natural disasters have impacted builders.

In some cases the cost to actually construct the home exceeds the sale price.

Many builders saddled with the additional costs demand a price increase or threaten to walk off the job. The buyer should not panic.

Even under extreme situations where materials are not only more expensive but actually unavailable, Florida courts have held such not to be grounds for a price increase or to excuse non-performance.

There is little Florida caselaw dealing with the principal of commercial impracticability. However, those cases which address the issue hold that unexpected difficulties or expenses will not excuse a party to a contract from performance. North American Van Lines v. Collyer, 616 So.2d 177 (Fla. 5th DCA 1993); and City of Tampa v. City of Port Tampa, 127 So.2d 119 (Fla. 2nd DCA 1961). In City of Tampa, the court strict measure:

Inconvenience or the cost of compliance, though they might make compliance a hardship, cannot excuse a party from the performance of an absolute and unqualified undertaking to do a thing that is possible and lawful. Parties sui juris bind themselves by their lawful contracts, and the courts cannot alter them because they work a hardship. The rights of the parties must be measured by the contract which they themselves made. A contract is not invalid, nor is the obligor therein in any manner discharged from its binding effect, because it turns out to be difficult or burdensome to perform. It has been said that difficulties, even if unforeseen and however great, are no excuse, and that the fact that a contract has become more burdensome in its operation than was anticipated is not ground for its recision.

Florida’s legal position as to commercial impracticability, as stated in the above-cited language, reflects a traditional notion that performance is excused only when actually impossible. See also Valencia Center, Inc. v. Public Supermarkets, Inc., 464 So.2d 1267, 1268 (Fla. 3rd DCA 1985). (Although impossibility of performance can include extreme impracticability of performance, the courts are reluctant to excuse performance that is not impossible, but merely inconvenient, profitless, and expensive.)

In the final analysis, a builder will have little success arguing for a price increase merely because there is no profit left in the house or because he must come out of pocket to complete construction.

Visit our website for more information on this subject.

Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.