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Supply shortages lead to construction disputes

The COVID-19 pandemic has caused supply chain problems in many industries, including early-pandemic shortages in meat and consumer paper products. One industry that continues to see shortages and price volatility is construction. These supply chain interruptions have caused and will continue to cause disruptions and disputes that impact Arizona professionals who practice in this industry.

Widespread disruptions

How widespread are shortages in the construction industry? A survey conducted by the National Association of Home Builders (NAHB) found that builders reported massive shortages in a wide range of materials. Some of the key findings include:

  • 94% of builders reported a shortage of framing lumber
  • 90% reported a shortage of plywood
  • 87% reported a shortage of windows and doors

Other key shortages included appliances, copper wiring, roofing materials plumbing fixtures and vinyl siding.

Legal ramifications

These shortages (and the skyrocketing prices that accompany them) move through the construction supply chain in a ripple effect, starting with suppliers, moving on the developers and contractors and finally ending up impacting consumers. At every point in this chain, transactions are governed by signed agreements. The numbers attached to these agreements are sometimes far out of line with the actual, present-day price of materials, leading to delays, cancellations and contract disputes.

In this environment of unpredictable prices, construction contractors have had to rely upon no-cause cancellation clauses, price escalation clauses and other legal means to avoid disputes with their customers. Suppliers, impacted most directly by supply shortages, have been accused of price gouging and otherwise taking advantage of the situation.

The difference planning can make

Anyone buying or selling in today’s unpredictable market should consult with experienced legal counsel who stays abreast of all developments in the market. By planning ahead before signing anything, it is often possible to avoid disputes. When disagreements do arise, advance legal planning places you in a stronger position to achieve a favorable outcome.

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