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Ask the Lawyer: Passing on Fuel Surcharges
This is the first in a series of occasional articles on legal issues confronting builders and the home building industry during these difficult and challenging times.
On June 23, the average price of gasoline in the U.S. was $4.079 per gallon, and the average price of a gallon of diesel fuel was $4.648, up 27% and 39%, respectively, from a year earlier, according to the Official Energy Statistics from the U.S. Government Energy Information Administration.
Given the rapid rise of fuel costs, including tag-on fuel surcharges has now become a routine practice for a wide spectrum of businesses engaged in product or service delivery. Whether large or small — from commercial services like UPS and Amex, to the neighborhood pizza parlor offering home delivery — most of these companies have added, or have at least considered adding, a fuel surcharge to their standard prices.
This situation comes as no surprise to NAHB members, who have reported the addition of fuel surcharges on invoices accompanying virtually every delivery of building and construction materials.
Builders and remodelers are then faced with the difficult choice of either absorbing these additional costs or attempting to pass the ever-increasing fuel surcharges on to their customers. But customers may object to paying pass-through fuel surcharges on the grounds that there is no provision for them in the construction contract. These cost disputes can lead to legal problems.
For example, cruise line operators Carnival and Royal Caribbean recently settled a dispute with their customers by agreeing to refund $61 million in fuel surcharges billed after the booking contracts were signed.
The fuel surcharge situation has attracted the attention of some state attorney generals who are empowered to enforce consumer protection acts, and who are now warning consumers to be on the lookout for undisclosed fuel surcharges.
In order to protect builders and remodelers from potential legal disputes with their customers or consumer protection agencies, NAHB Legal Affairs has drafted a sample contract clause authorizing the addition of fuel surcharges to the cost of the construction that is to be paid by the customer.
This sample clause can be viewed on the Construction Liability page on the NAHB member Web site: www.nahb.org. The sample clause is provided for information purposes only. It is recommended that members consult with their local attorney concerning the use of such a clause and its inclusion in their construction contracts.
If you want more information on this topic or other legal issues with an impact on the home building industry, have a legal question or just want to know more about the free legal resources available to you as an NAHB member, click here.
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