Texas Association of Builders

The Texas Association of Builders included price escalation clauses in their standard contracts 

The Texas Association of Builders included an escalation clause in their standard Fixed Price Contract to allow price increases to be passed onto homebuyers.“The Texas Association of Builders’ (TAB) Fixed Price Contract includes a provision which addresses these issues directly in the “Escalation of Certain Material Categories” provision. In short, the provision states that building materials utilized in construction (including lumber) are subject to various price variations. In the event of a price increase in excess of 25%, the provision provides a comprehensive mechanism allowing the excess to be passed through to the owner, resulting in an increase in the Total Contract Price.” (Texas Builder, Nov/Dec 2020)

Texas Association of Builders: “The provision is written to protect the builder by shifting price-related risk in a fixed-price contract to the home- buyer.” “The provision is written to protect the builder by shifting price-related risk in a fixed-price contract to the home- buyer. If the builder signed a cost-plus contract, price increases are already passed through to the owner. Either way, the builder is protected with the execution of a TAB Contract. In the event material prices increase in excess of 25% from the average price of similar materials purchased in the preceding 30-day period, the increased costs may be passed through to the homebuyer.” (Texas Builder, Nov/Dec 2020)

The clause allowed the contract to be considered in default if the homebuyer refused to accept the price increase.“In other words, this provision allows for the “un-fixing” of the price when rare but foreseeable events cause significant price increases. Please exercise this provision to receive fair payment for the escalating materials. If the owner refuses to pay the additional costs under many clauses (including the TAB form clause),it is a default of the contract by the owner, and you should promptly notify them.” (Texas Builder, Nov/Dec 2020)