Additional Pay for Additional Work?

Based on ruling 78005 of the Eretz Hemdah-Gazit Rabbinical Courts.

Case: The plaintiff (=pl) is a company that supervises building projects. The defendant (=def) is a group that sought to receive rights and build two residential buildings. Def hired pl to supervise the building project for 384,000 shekels (2.5% of the cost of building). The contract says that this is a final price, and there cannot be renegotiating due to inflation, discovered costs, or anything else. The government required the group to build a two story parking building instead of the planned uncovered parking lot, and pl claims that it added more than 1,500,000 shekels to the price of the project and required extra work. Therefore, pl demands an extra 38,000 shekels, using the same 2.5% price key. Def responds that since the contract sets the price as totally final, pl cannot ask for more. They also included an estimate made for a loan application that puts the amount of increased expense at significantly less. Also, if someone should pay pl, it should be the chevrat nihul (cn – the company that def pays to handle the project as a whole), as they have been paying two thirds of pl’s fee. Finally, a compromise had been worked out, for def to pay 27,350 shekels, and although it did not come to fruition, def should not have to pay more than that.

P'ninat Mishpat (704)

Various Rabbis

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Ruling: Beit din determined that the price set was based on a blueprint of the project that did not include the parking building. As such, it does not cover the additional work, unless the standard practice is that a set fee cannot be changed even when major new elements of the work are added. The expert beit din hired said that the practice is to increase the price for new elements. It is also of note that the other major contracted companies saw an increase due to the change.

Regarding the amount due for the addition, pl’s calculation, based on the agreed upon percentage per the amount paid already to the contractor for building, is a logical, precise way to calculate. In contrast, def’s idea of taking the estimate presented early on to a bank in a financing request is arbitrary and inexact. Therefore, 38,000 shekel is the correct amount. The expert said that a 2.5% rate is under the norm for such jobs.

Even if, in practice, cn paid pl, that was based on an internal arrangement between def and cn. For our purposes, the important thing is that def obligated itself to pay pl, and thus it is responsible to ensure that pl receives as much as it legally deserves.

At first glance, the compromise agreement, even if unsigned, is binding because there was work done after the agreement, and this serves as a kinyan (see Shulchan Aruch, Choshen Mishpat 315:4). Second of all, since pl only had to be mochel (relinquish rights), this does not require a kinyan. However, since the compromise was made with the understanding that def would pay promptly and without a further legal battle, the mechila was done under false pretenses and is null (see similar idea in Eretz Hemdah-Gazit ruling 77015).