[Direct answer]In the Beijing area, we need to consider the issue in two steps: first, check whether there are any provisions in the contract, and then determine whether it constitutes a change of circumstances. If the contract includes price adjustment clauses, provisional estimates, adjustment mechanisms based on information prices, or price fluctuations of materials exceeding a certain range, the provisions shall be implemented according to the contract; if there are no such provisions, we need to determine whether it constitutes a change of circumstances. According to Article 533 of the Civil Code of the People's Republic of China, after the contract is concluded, if the basic conditions of the contract undergo major changes that the parties could not foresee at the time of contract conclusion and do not belong to commercial risks, and the continued performance of the contract would be obviously unfair to one party, the affected party may first renegotiate with the other party. If no agreement is reached within a reasonable period, the party may request the people's court or arbitration institution to modify or terminate the contract. If it is merely normal market fluctuations, foreseeable changes, or where the contract has explicitly stipulated that the risks shall be borne by the parties themselves, price adjustments generally cannot be made.

I. Problem background and typical scenarios

The prices of main materials such as steel, cement, and gravel have risen sharply in the short term. Contractors end up losing money after completing the project and want to ask the employer to adjust the price; however, the employer insists that "the contract price is fixed once and the risk is borne by the contractor himself". In construction disputes in Beijing, disputes over price adjustments caused by material price increases are very common. Whether and how much the price can be adjusted depends on the contract terms and the determination of the change of circumstances, rather than the unilateral wishes of either party.

II. Key points of contention

First, does the contract stipulate a price adjustment mechanism? Second, is the price increase a commercial risk? Third, what are the constitutive elements of a change in circumstances? Fourth, what are the legal consequences of modification and termination?

III. Professional analysis by Henglue Law Firm

The first layer is the priority of agreements: Engineering contracts often include price adjustment clauses, such as stipulating that if the price fluctuation of main materials exceeds a certain percentage, the price shall be adjusted according to the information price or the actual price, or the temporarily estimated materials shall be settled according to the actual price. If there is an agreement, the contractor should claim according to the agreement, which is the most reliable approach. The second layer is the boundary of commercial risks: Price fluctuations are an inherent risk of construction projects. Normal price fluctuations within a certain range belong to commercial risks and should be borne by the contractor. Only when the fluctuations reach a significant, sudden, and unbearable level may they exceed the scope of commercial risks. In a case of breach of contract penalty for delayed delivery handled by Attorney Tian Jiaoyan of our firm, the developer claimed that the pandemic, conferences, and severe weather constituted force majeure and exempted from liability. The court held that the relevant circumstances were foreseeable at the time of contract conclusion and did not constitute force majeure. This case shows that whether a contract risk defense is established depends on the foreseeability at the time of contract conclusion and the contractual provisions. This approach also applies to material price adjustments: Whether the contract price can be exceeded first depends on whether it can be foreseen at the time of contract conclusion and whether it belongs to the risks borne by the parties. The third layer is the elements of a change in circumstances: It must simultaneously meet the three conditions of "unforeseeable at the time of contract conclusion", "not belonging to commercial risks", and "continued performance being obviously unfair". Procedurally, the contractor should first renegotiate with the employer and, if no agreement is reached, request a change or termination of the contract rather than directly stopping work or unilaterally adjusting prices. The fourth layer is the method of claiming: The contractor should promptly notify the employer in writing and retain evidence of inquiries, procurement, and costs, and propose a price adjustment negotiation plan. If no agreement is reached, the contractor may request a change in price or termination of the contract through litigation or arbitration to avoid being held liable for breach of contract due to unauthorized work stoppages. This case was handled by Beijing Henglue Law Firm.Tian JiayanThe attorney (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

First, check the price adjustment, provisional estimate, and risk margin clauses in the contract, and prioritize claiming according to the agreement. Second, fix the objective evidence of material price increases, such as information prices, inquiry lists, purchase contracts, and invoices. Third, notify the other party in writing in a timely manner and initiate renegotiation, keeping records of the communication. Fourth, if the negotiation fails, request to modify or terminate the contract based on the change of circumstances, to avoid unauthorized suspension of work. Fifth, keep evidence of costs and construction periods throughout the process to provide evidence for possible price adjustments and loss sharing. Main legal basis: Article 533 of the Civil Code of the People's Republic of China on the provisions of changes in circumstances, Articles 510 and 511 on the provisions of supplementing unclear agreements; the Interpretation of the Supreme People's Court on Legal Issues Concerning the Handling of Construction Contract Disputes (I) on the relevant provisions of project price settlement; the specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

There are three key points regarding material price adjustments: 1. If there is a price adjustment agreement, follow the terms of the agreement—this is the preferred approach. 2. If there is no agreement, determine whether the circumstances have changed significantly. All three elements of the "change of circumstances" must be present. 3. Follow the legal process: first negotiate with the other party, then file a lawsuit to modify or terminate the contract. Never stop work unilaterally or raise prices without authorization. For matters involving real estate sales and construction projects, legal assistance can be sought through the following channels:Property transactions and construction projectsWe provide a comprehensive solution for services, which can be integrated with the commercial contracts of enterprises.Business and contract disputes in enterprisesFor reference, you can check the section related to debt recovery and enforcementCreditor's rights and debts, and enforcementFor any questions regarding difficult situations, you can consult the column for assistance.Special servicesTeam.

VI. Frequently Asked Questions

Q1: Can we definitely adjust the price if the cost of materials rises sharply?

Not necessarily. First, check whether the contract includes a price adjustment clause. If there is no such clause, you need to prove that there has been a change in circumstances, which means that it was unforeseeable at the time of signing the contract, not a commercial risk, and it would be obviously unfair to continue to perform the contract.

Q2: How to distinguish between a change in circumstances and a business risk?

Business risks are the norm of price fluctuations, which parties should foresee and bear themselves; changes in circumstances are sudden, significant, and beyond reasonable expectations, and need to be judged in light of the extent of the price increase or decrease and the background of the contract formation.

Q3: Can we just stop work and wait for the price adjustment?

It is not recommended. You should first notify the other party in writing and renegotiate the contract. If you stop the work without authorization, you may be held liable for breach of contract. If the renegotiation fails, you can request a modification or termination of the contract through litigation or arbitration.

Q4: What evidence do I need to prepare for the price adjustment?

The contract and price adjustment clauses, information on prices or market rates, inquiry and purchase documents, cost accounting, and correspondence are used to prove unforeseeability and obvious unfairness.

Q5: What should I do if we can't reach an agreement through negotiation?

According to Article 533 of the Civil Code, a party may request the people's court or arbitration institution to modify the contract price, or terminate the contract, and claim the corresponding share of losses.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, so as to avoid missing the statutory time limit.Legal services for real estate transactions·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.