By Ed Moltzen, Contributing Writer, LIBN
The construction and contracting trades have been among the most vibrant on Long Island for the past several years, as new housing and related projects have unfolded amid a run of economic expansion.
But new rounds of tariffs from Washington, D.C., are proving vexing for firms whose work relies on stable pricing of supplies ranging from Canadian lumber to aluminum to steel.
The result: General contractors and subcontractors may be searching for remedies to protect them from unanticipated price surges as suppliers pass the cost of new tariffs down the supply chain.
Long Island legal experts say the key to navigating choppy tariff waters will be to address them, where possible, upfront in contracts with provisions specific to wild, tariff-driven price fluctuations.
For bigger construction-related firms, that could be the difference between profit and loss on a project. For smaller construction firms, a sudden price hike from tariffs could put them out of business.
“The challenge you have is…contracts that are signed today; the work doesn’t start for another month or two,” said Donald Rassiger, a partner at Campolo Middleton & McCormick, LLP. And in that time, tariffs could be enacted, pulled back or even increased.
That’s why price flexibility in contracts—to account for that uncertainty—can save a contractor big bucks down the road.
Customers may otherwise say, “You put a lump sum price in for this…I’m holding you to your price,” Rassiger added.
Other issues include the potential for significant product shortages, as demand for domestically produced items overwhelms the supply. During the pandemic, a similar crunch happened four and five years ago, and some remember well the crunch to obtain goods to meet contractual obligations.
However, at that time, courts were also closed due to the pandemic, so the number of breach-of-contract lawsuits was minimal, meaning contractors and customers had to work it out as best as they could in many situations. Now, courts are open for business, so negotiating contracts in advance to take the uncertainty of tariffs into account is essential.
“Yes, there are some cases that get litigated,” Rassiger said. “I’ve had my fair share of them over the years. I would say, for the most part, these issues do eventually get worked out between the contractors and the owners. But there are instances where they proceed, and I’ve had my fair share of arbitrations over the years over these issues.”