Q: Is homeowner responsible for construction cost exceeding the quote from the general contractor.
Detailed plans, and quote. No unexpected problems with construction. On time, quality work, etc. Contractor admitted underestimated. He offered to discount bill, but still >
150k over quote.
Over the quote, or over the contract you and he signed? There's a vacuum of information here that needs to be filled in. You say no unexpected problems, but were all fixtures and materials specified, or did you constantly pick out expensive high-end products and materials after the quote and/or contract was signed that added cost? As different phases of the work was performed, was cost discussed, and what was said/communicated by each of you on each occasion? Did you communicate acceptance/agreement with proceeding as extra costs were raised, or is there a basis for the contractor to reasonably assume that you did? $150,000 seems like a big number, but on a $1-2 million project maybe not as outrageous as on $300,000 project. What was the original quote? What was the draw schedule, and can you get an accounting of how all the money was spent? What were the amount of the other quotes you received for this project before selecting this contractor? Was his the lowest, by as much as $150,000? Maybe that's a hint.
There are three scenarios:
(1) the contractor didn't use all the money you paid him on your project, but either lined his pockets with too much advance profits or transferred the cash you were paying him to cover his costs to complete other jobs he was on (an all-too common occurrence with some contractors), and now he doesn't have the money to finish yours or pay off all his subs (which raises sticky mechanic's lien issues for you when they all start filing liens against your house for nonpayment);
(2) the contractor doesn't know how to bid a contract properly, or underbid to get the job, now realizes he made a bad deal but has stuck with the job in good faith to honor his commitment, but at the same time is in financial distress due to having to perform a very expensive project for $150,000 below his costs and reasonable profit margin, and now you are in position to either reap a windfall benefit getting a more valuable project performed than what you are legally obligated to pay for, or being reasonable and honest and paying the contractor what the job is genuinely worth or fair to pay; or
(3) the original quote was reasonably accurate with the materials and fixtures the contractor contemplated using, but not with the fixtures and materials you ultimately selected and had him install, and the issue is one of poor contract specificity and poor change order policies to keep both parties up to date with changes from the original quote.
Or it could be some combination of all three. But you can't really know which unless you have an accounting of the expenditures by materials costs and subcontractor costs, and profits taken above those hard invoiced costs. In a classic construction project, there's an owner, an architect, and a general contractor, and the architect acts as quality control, approves the original contract price so that all materials and labor are covered, makes the draw schedule, and approves draws based on completion and quality. Most owners save money by not using an architect, and most contractors want to avoid oversight. If no architect, the contractor runs the show. Hopefully your project is complete and to your satisfaction, and all subs are paid.
So, as to your original question, Can he raise the price? He can try. Whether you are obligated to pay it, or there is a practical reason to do so, or you litigate the dispute, really depends on the above. If you don't pay, he can walk or sue.
Derek A. Hills agrees with this answer
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