Legal Briefing: What Happens When You Underestimate the Job

It’s not uncommon to underestimate what a job is going to cost and then face a challenge — namely, whether you can find a way to increase your contract price rather than eat the additional expense.

This can arise when you send a proposal out with a job quote that does not require a formal agreement to be signed; a formal agreement might, in fact, address certain conditions that would increase the price.

I recently received the following inquiry:

“We have been thinking about how best to ask for extra hours when a job goes longer than anticipated. We want to get paid for the extra hours. We had written that the quote includes 100 hours, and we will give you five hours at no additional cost. If it exceeds 105 hours, you agree to pay $120/hour.”

The first problem is this: Although you have this in your “quote,” which I assume to be your proposal, you need it in your agreement with the subscriber.

If you use the Kirschenbaum All in One agreements, I know that you use the Schedule of Equipment and Services.

Since most of you use proposals, and some of you simply put “See Proposal” on your Schedule of Equipment and Services, I just want to be clear that your “deal” with the customer is found in the contract — not in the proposal.

Yes, you can incorporate the proposal into the contract; then, it’s in the contract.

There are two common ways to make sure you are paid for your services: a fixed amount or on a Time and Material (T&M) deal. The T&M deal isn’t common in the alarm industry, so you’re going to be working on a fixed price.

The Kirschenbaum Contracts already have built-in provisions for increases in some circumstances. For example, you can raise the recurring monthly revenue (RMR) up to an agreed amount each year; you can raise the price by an increase in cost of material.

You can raise the price if the Authority Having Jurisdiction (AHJ) requires additional equipment or service; and you can raise the price if installation is delayed.

There is no provision that permits an increase just because you underestimated the job, unless the price you gave is so off the wall that it could not be disputed that you lacked capacity to contract in the first place.

Getting Paid What You’re Worth

I suppose that one legal concept might help: that would be when both you and the customer made a material mistake in the job. A mutual mistake by both parties can serve as grounds for voiding the contract.

By contrast, a mistake by one party, but not the other, is not grounds for voiding the contract. (The only exception would be a finding of unconscionability, in which case the court wouldn’t enforce the contract. For example, if you quoted $3,000 for a $45,000 job.)

The simple words proposed above are not likely to be well received by a customer because they’re too open-ended. You can’t quote a price, quote the estimated time for completion of your performance and then demand more money — a lot more money — because you didn’t estimate the job correctly. At the least, you can’t do so without some justification that I would suggest be placed in the contract.

As an example, suppose your customer and you really aren’t sure of the scope of the job or how long it might take. (Maybe the building isn’t fully designed or constructed yet.)

In that case, it would be appropriate to state just that in the contract: that time and material could not be fully determined at time of contract and that the parties agree to T&M after a certain stage of the job or after a fixed number of work hours have been exhausted. (In your case, this would go in the Schedule of Equipment and Services.)

What you should remember is that you can put most anything in your contract as long as it’s clear, not entirely unreasonable (i.e., unconscionable) and agreed to. It’s probably best to involve your attorney when trying to structure and word hybrid deals like this one.

If you are a Concierge Client, get a free half-hour each month for contract review and assistance. You should sign up today for the Concierge Program if you’re not already a member.

Call K&K concierge coordinator Stacy Spector, Esq., at 516-747-6700 x304 or email [email protected].

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