It is important to document price increases and to notify the contractual partner of any price increase in writing as early as possible. (Photo: © ronstik/123RF.com)
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April 2026
Since the start of the Iran-Iraq War, raw material and fuel prices have risen sharply, while materials are becoming scarce and deliveries are delayed. Are price adjustment clauses a solution for tradespeople? An expert offers legal advice.
In light of rising production and material costs , as well as persistent supply bottlenecks , craft businesses face major economic challenges. Particularly since the start of the Iran conflict on February 28, 2026, raw material and fuel prices have increased significantly, while material availability and delivery times are becoming increasingly uncertain.
A general legal assessment of the impact on existing and future contracts is not possible – however, case law provides fundamental guidelines . Sylke Radke, acting managing director of the Cottbus Chamber of Skilled Crafts , explains how contracts can be adapted to remain both legally sound and economically viable.
The so-called frustration of purpose ( § 313 of the German Civil Code ) applies if, after the conclusion of the contract, circumstances have changed so significantly that, considering all circumstances of the individual case, adherence to the unchanged contract is unreasonable . In the case of contracts, the assumption of equivalence between performance and consideration constitutes the basis of the transaction. This means that frustration of purpose is generally considered possible for contracts concluded before February 28, 2026.
The question is how high a cost explosion must be to justify the assumption that the basis of the contract has ceased to exist. In its "screed thickness decision" (dated June 30, 2011, VII ZR 13/10) , the German Federal Court of Justice (BGH) clarified that there is no fixed limit to price increases. The decisive factor is how the overall financial outcome affects the existing contract. The BGH stated that if not only is profit consumed, but losses are incurred, adhering to the price agreement is no longer reasonable due to a one-sided allocation of risk.
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There is no set formula for when a price adjustment can be demanded. It is important to document price increases and notify the contractual partner of any price increase in writing as early as possible . However, it should also be noted that the cost increase cannot be unilaterally passed on to the contractual partner in such a way as to allow for a profit (Regional Court of Bonn, Judgment of April 8, 1992, 19 O 246/91). Invoking the "frustration of purpose" is an exception, as contracts must generally be fulfilled. Therefore, a general claim for additional compensation does not exist solely on the basis of unforeseen price increases.
For newly concluded contracts, the risk of potential price increases is known . The contract should include provisions addressing (potential) additional costs due to material price increases and other contract components that may be affected by the Iran crisis.
It should be noted that price increases for consumers for services rendered within four months of the contract's conclusion are inadmissible according to § 309 No. 1 of the German Civil Code (BGB) . This means a price adjustment clause is only permissible if the service is rendered after the four-month period following the contract's conclusion, or in the case of ongoing contracts where a significant portion of the materials is purchased only after the four-month period has elapsed.
For new contracts with other companies ("non-consumers"), an "individual agreement" should ensure that cost increases during the course of the contract are taken into account. A formal provision in general terms and conditions (GTC) with price adjustment clauses regularly fails due to strict case law, is not legally sound, and is therefore not recommended.
An "individual agreement" should therefore contain the following information:
"The parties are aware that, due to the Iran war, the calculated prices are currently subject to unpredictable fluctuations. The prices for building materials were calculated based on the purchase prices as of [date]. The contractor is entitled to claim any price increases for services to be rendered from [date] onwards from [date] onwards from the date of the quote onwards. These price increases must be substantiated with appropriate documentation. The parties hereby agree to reach an agreement on a new price that takes into account the increases in material prices. Should material prices decrease, the client may claim this from the contractor, and a new price must likewise be agreed upon, reflecting the reduction in material prices."
It should be noted that such an arrangement requires a verifiable calculation by the contractor, as they must be able to substantiate the price increase . The aforementioned wording aid must be reviewed, and it must be assessed in each individual case whether it is applicable and enforceable against the client.
Such formulations must not be used in public tenders and contracts; they will inevitably lead to the exclusion of a bid!
Procurement procedures whose bid deadlines fell before the outbreak of war (February 28, 2026) and for which the contract has not yet been awarded must be examined by the contracting authority with regard to its duty to clarify the issue. The bidder must be requested by the contracting authority to clarify the price . According to the German Federal Court of Justice (decision of January 31, 2017, X ZB 10/16 ), the rejection of a contract award is generally required if the contracting authority cannot satisfactorily resolve remaining uncertainties. Such uncertainties are likely to exist in bids submitted before the outbreak of war.
Furthermore, it should be noted that an offer containing a reservation in the form of a sliding scale clause must be excluded from competition ( § 25 No. 1 para. 1a VOL/A ) insofar as specific, fixed prices have been requested.
Online Information Event from the Cottbus Chamber of Skilled Crafts: The Chamber of Skilled Crafts offers member businesses practical support on this topic via an online information event . Are you interested in the topic of "price adjustment clauses" ? Express your interest to martin@hwk-cottbus.de and the Chamber will inform you as soon as the date for the information event is set.
The advisors at the Chambers of Crafts will be happy to help you with any legal questions!
DHB now also available digitally! Simply click here and register for the digital German Crafts Journal (DHB)!
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