External factors in construction contracts – impediments, price adjustments and contractual safeguards

Hindrances and disruptions

External macro events can, in a construction law sense, constitute a hindrance under AB 04/ABT 06, Chapter 4, Sections 3–4, and the rules on hindrances and hindrance compensation are therefore central in the current macro environment.

The contractor is entitled to an extension of time in a number of typical situations. Of these, from a macro perspective it is primarily decisions by public authorities, war, epidemics, and the general catch-all provision – i.e. circumstances that could not have been foreseen and could not reasonably have been avoided – that are of the greatest interest.

An important distinction is that the right to an extension of time and the right to financial compensation do not automatically follow one another. As a starting point, a hindrance situation gives rise to a right to an extension of time but not normally to a right to financial compensation; hindrance compensation presupposes that the hindrance is due to circumstances on the client's side.

A key practical point is the duty to give notice. Notice of the hindrance must be given without delay; otherwise the right to an extension of time is lost. The term "without delay" is not further defined in the standard contracts, but in practice it has been interpreted strictly – notice should be given within a few days of the hindrance arising or becoming known. There is often a requirement of written form. Such requirements admittedly need to be expressly stated in the administrative regulations to apply, but to avoid dispute and ensure clarity, notice should always be given in writing. The practical lesson is clear: a contractor affected by a hindrance – whether relating to material shortages, delivery delays, or a decision by a public authority – must act immediately. A delayed or informal notice may mean that the right to an extension of time, and thereby protection against liquidated damages, is lost even though the hindrance itself satisfies the substantive requirements.

Case law shows that the distinction between a hindrance and additional/altered work ("ÄTA" work) can be decisive for the scope of the right to compensation. If a disruption caused by external macro events results in additional or altered work, there may be a right to additional compensation. To be entitled to ÄTA compensation, specific formal/notice requirements apply, and communication of the consequences of a disruption should therefore be clear and should clarify whether the matter concerns a hindrance or ÄTA work – or both.

Price changes and index clauses

The agreed price must be changed in certain situations under AB 04, Chapter 6, Section 3 (ABT 06, Chapter 6, Section 3). The following three typical situations can be highlighted:

• Government measures – for example export bans, sanctions, legislative changes, or other interventions by public authorities that affect the cost level.

• War or other crisis conditions – events of a force majeure nature that create cost changes relating to supplies or services necessary for the construction contract. (Note that the standard contracts do not use the term force majeure but instead have their own hindrance regime in Chapter 4, Sections 3–4; the right to price adjustment under Chapter 6, Section 3 is a separate mechanism.)

• Abnormal price changes for materials – market-based price movements that are to be regarded as deviating from normal fluctuations.

For the cost change to give rise to a right to price adjustment, it must be unforeseeable and materially affect the entire cost of the construction contract.

Claims for price increases have long been rare, and until recently there was only one guiding precedent – a Court of Appeal judgment from 1978. Over the past year, further case law has emerged: a district court judgment [1] and a judgment from the Göta Court of Appeal [2]. In the district court judgment, a price increase of 3.6 percent was assessed as unforeseeable and material; extensive evidence was presented in support of the claim. In the Court of Appeal judgment, by contrast, the price increase claim was rejected. The Court of Appeal clarified that the burden of proof is high and that standardised calculations – for example industry statistics on general steel price increases – are not sufficient. The contractor must demonstrate the actual cost increase suffered by the individual project.

The parties can protect themselves contractually against price risks, and eliminate the need for extensive evidence, through index clauses. The standard contracts contain no index provisions, so the parties must regulate this themselves. An index clause links the price to a relevant price index. Terms on index adjustment are intended to be included in the administrative regulations under code AFC.614 and AFD.614 respectively. For an index clause to be effective, it should specify what is to be index-adjusted, which index is to be applied, the base date, and the comparison date.

When drafting the contract, the parties should also take into account procurement law aspects: there is a risk that index clauses, if not adequately designed, could result in a change being assessed as impermissible under procurement law.

The section above primarily highlights the contractor's rights. From the client's perspective, there is reason to regulate protective mechanisms in the contract against uncontrolled price increases, for example through cap amounts or price ceilings in index clauses, symmetrical risk-sharing mechanisms whereby both parties bear part of the cost increase or cost decrease, and a right to renegotiate or cancel in the event of extreme price changes that materially alter the economic balance of the contract.

Practical recommendations

In light of the above, the following recommendations can serve as guidance for contract management and project execution:

• Give notice without delay and in writing – The right to an extension of time in the event of a hindrance can be lost if notice is not given without delay. Ensure that the project organisation has clear procedures for reporting hindrances, including templates and allocation of responsibility for who gives notice and how documentation is handled.

• Address macro risks in contracts from the outset – Uncertainty regarding the development of material prices and the economic cycle should be addressed already when drafting the contract. Clauses on price revision, indexation, and allocation of responsibility for abnormal cost increases should be carefully analysed. Consider regulating threshold values for price changes, allocation mechanisms between the parties, and what documentation is required to trigger a price adjustment. Deviations from the regulation in the standard contracts require clear and formally correct handling.

• Choose the right index clause and design it fully – An index clause should specify (i) what is to be index-adjusted, (ii) which index is to be applied, (iii) the base date, and (iv) the comparison date. The index should be chosen based on the project's actual cost structure – for example the construction index E84 for design-and-build contracts, Statistics Sweden's (SCB) factor price index for building materials in cases of high material exposure, or the Building Cost Index (BKI) for a broader cost picture. In cases of high exposure to individual raw materials, material-specific indices may be preferable. The procurement law aspects should also be considered; an index clause that is not adequately delimited may result in a change being assessed as an impermissible material change.
  
  

[1] Örebro District Court, judgment of 5 December 2025, case no. T 715-23.
[2] Göta Court of Appeal, judgment of 27 November 2025, case no. T 3368-24.