New Construction Case Law – Compensation for Abnormal Price Changes under AB 04/ABT 06, Chapter 6, Section 3

At the end of November and beginning of December 2025, respectively, two judgments were handed down in which the issue of changing the agreed price based on AB 04/ABT 06 Chapter 6 Section 3 was examined.[1] In this article, we briefly describe the circumstances of the cases, how the courts reasoned, and provide an overview analysis of the judgments.[2]

Brief summary of AB 04/ABT 06, Chapter 6, Section 3

Under the Swedish general conditions of contract for construction works (AB 04 and ABT 06), fixed-price remuneration is based on the principle that the contractor bears the risk of performing the works as priced. However, AB 04 and ABT 06 provide a number of exceptions to this main rule, under which the risk may be allocated to the employer, for example in cases involving changes in regulatory requirements or impediments attributable to the employer.[3]

Another such exception is the risk of cost increases for the contractor, which under certain conditions, according to AB 04/ABT 06 Chapter 6 Section 3, may result in a change to the agreed price. The provision has the following wording in both AB 04 and ABT 06.

“Agreed prices shall be adjusted with regard both to changes in costs resulting from the official action, and changes in costs caused by war or other crisis situation with similar effect which relate to supplies or services which are essential to the Total Works, and changes in costs due to abnormal price changes relating to materials included in the Total Works. Adjustment of the agreed price must however be made only if the change in costs has not been foreseeable and it substantially affects the whole cost of the Total Works.”.

The provision in the AB agreements, the wording of which originates from the oil crisis of the 1970s, has not previously been subject to judicial review.[4] Therefore, there has been a lack of case law to guide its assessment. However, because of the sharp price increases for materials in connection with, among other things, the outbreak of Covid-19 and the war in Ukraine, the provision has become relevant. Recently, two judgments were handed down in which the provision was examined.

Göta Court of Appeal's judgment in case T 3368-24, announced on 27 November 2025

The case concerns a construction project in which, in March 2021, an employer commissioned a contractor to act as a turnkey contractor for the new construction of an industrial building, which was also to include offices and a wellness centre, among other things. The contract incorporated ABT 06. In the case, the contractor requested compensation for increased material costs.

The contractor pointed out that the provision in ABT 06, Chapter 6, Section 3, had rarely been applied in case law and that, against this background, there was no established method for calculating cost increases. The contractor applied a method based on the index at the time of purchase, which was compared with the index either on the contract date or on the earlier date when the tender was binding. In other words, the contractor did not base its calculation on its actual (verified) cost increase, but on the market as a whole.
The District Court rejected the claim on the grounds that the contractor had not proven that it had incurred any additional costs and therefore, within the meaning of the provision, should not be considered to have been affected by any change in costs.

The Court of Appeal also stated that compensation under the provision requires that the contractor has suffered a change in costs, which the contractor had to prove. More specifically, the Court of Appeal stated that the provision in ABT 06, Chapter 6, Section 3 does not constitute an agreed index adjustment, but rather an adjustment in the event that the contractor's actual costs have been affected – something that the contractor in the case had not demonstrated.

In summary, both the district court and the court of appeal rejected the contractor's claim, on the basis that the concept of cost change in the provision should be interpreted as the individual contractor's (proven) cost change.

Örebro District Court's judgment in case no. T 715-23, announced on 5 December 2025

In autumn 2019, a contractor submitted a tender to construct a water reservoir. The contract incorporated AB 04. Available statistics during the tender period showed a slight decline in steel prices. Based on these statistics, the contractor had added SEK 270,000 to its calculation as a risk premium for steel price increases. The risk premium was calculated as a consequential risk of SEK 540,000 and a 50 per cent probability of this occurring.

During the contract period, the contractor entered into an agreement with a Polish steel supplier on terms stipulating that the supplier was entitled to special compensation if a specified Polish index changed by more than five percentage points. In the event of a price increase of more than five per cent, the supplier was therefore entitled to special compensation from the contractor.

During the contract period, the price of steel increased by more than five per cent, with the consequence that the Polish material supplier is entitled to special compensation in accordance with the agreed index.

In the case, the contractor requested compensation from its employer for the Polish supplier's invoiced claim for special compensation (index), less the above-mentioned risk surcharge of SEK 270,000. (The case also includes other claims from the contractor, which we do not address in this article.)

The question of whether the contractor suffered an actual increase in costs

Similar to the ruling by the Göta Court of Appeal, the district court stated that the contractor's right to compensation requires that the contractor suffered increased costs, i.e. the contractor had to prove an actual increase in costs and the size of this increase.

In support of this, the contractor referred, among other things, to invoice documentation from the Polish supplier. In the case, the employer claimed that the concept of cost change in AB 04 Chapter 6 Section 3 refers to the difference between the actual material cost and what the contractor had to reckon with when submitting the tender (which is not necessarily the same amount that a supplier is entitled to invoice additionally on the basis of an index clause). However, referring to the fact that price trends had been stable when the contractor submitted its tender, the district court stated that the amounts invoiced by the Polish supplier had in any case not been higher than the contractor's actual cost increases and that the contractor had thus substantiated its cost increase in this respect.

The question of whether the cost change was due to abnormal changes in material prices

To substantiate that the cost change was abnormal, the contractor cited two indices: the Swedish Construction Index and a Polish steel price index. Both supported the view that steel prices had been relatively stable during both the tender and initial contract periods but had increased significantly about a year into the contract period. On this basis, and through witness testimony, the district court found that the contractor had proven that the cost change was abnormal within the meaning of AB 04, Chapter 6, Section 3.

The question of whether the cost change was unforeseeable

Regarding the question of whether the cost change was unforeseeable, the district court stated that this means that it must be a matter of an incalculable risk – something that during the tender period constituted an uncertainty that could not be made the subject of any risk calculation or assigned a price. To substantiate that the cost change was unforeseeable, the contractor referred to witness testimony and an alternative calculation of the price increase that was foreseeable during the tender period, which amounted to just over SEK 300,000.

The District Court stated that, when applying the provision, a deduction should be made for foreseeable cost changes. As already mentioned, based on available statistics during the tender period, the contractor had added SEK 270,000 to its calculation as a risk premium for steel price increases, calculated as a consequential risk of SEK 540,000 and a probability of 50 per cent. However, the District Court considered that the employer should not be responsible for the contractor's assessment of the 50 per cent probability, and therefore a deduction for the entire consequential risk of SEK 540,000 should be made.

The question of whether the cost changes significantly affected the total cost of the contract

Finally, regarding the question of whether the change in cost significantly affected the contractor's cost for the entire contract, the District Court stated that a comparison should be made with the total price, i.e. in accordance with the wording of the provision. The District Court thus considered that the cost change in the case should be compared with an amount corresponding to the contract sum, adjusted for additions and deductions, and not with the contract sum alone. [5] On this basis, the district court calculated the unforeseen cost change to be 3.6 per cent of the total price, which has been found to meet the requirement of materiality under the provision.

Within the framework of the materiality test, the employer claimed that a deduction should be made to the extent that the cost change did not meet the materiality threshold. The district court did not share the employer's view.

Summary

In summary, the district court essentially upheld the above claims in the case and thus found that the contractor had proven:

• that the contractor had been affected by a cost change (increase)
• that the cost change was due to abnormal price changes
• that the cost change – after deduction for the estimated consequential risk of SEK 540,000 – was unforeseeable (risk that could not be calculated during the tender period), and
• that an unforeseen cost change, estimated at 3.6 per cent of the total price, met the requirement of having significantly affected the contractor's cost for the contract.

It should be added that the contractor put forward an additional partial claim regarding alleged abnormal cost changes, which the district court rejected on the grounds that the contractor had not proven that it had suffered any such cost increases (i.e. on the same grounds as the Göta Court of Appeal rejected the claim).

Concluding reflections

Both judgments above express the view that contractors' approval in cases concerning changes to agreed prices under AB 04/ABT 06, Chapter 6, Section 3, requires that the contractor can prove an actual cost increase and its magnitude, in which case compensation is limited to the amount. Based on the courts' interpretation, the provision does not therefore constitute a price adjustment clause but – as far as contractors' claims are concerned – a cost recovery clause.[6]

Contractors who intend to pursue claims for compensation for cost increases must therefore report and verify their costs. The courts have not upheld claims where contractors have been unable to provide invoices or other supporting documents. Materiality deductions have not been applied; instead, the contractor's foreseeable cost increase (which the contractor must substantiate) has been used as a basis for calculation and deducted accordingly. The judgments thus confirm the importance of contractors having a lot to gain from both detailed and thorough calculations prior to submitting bids and detailed reporting of cost data to substantiate how actual costs have been affected in relation to what applied when the bid was submitted. It is not sufficient to present documentation of how prices or price indices have developed.

At the time of writing this article, neither ruling has become final and binding and both may therefore be subject to appeal. We are therefore monitoring the possible continuation of the cases with great interest and will return after a possible review – in one or both cases. If you have any questions regarding the requirements under AB 04/ABT 06 Chapter 6 Section 3 or the courts' assessment of the above cases, please feel free to contact us.

References

[1] The wording of the provisions in AB 04, Chapter 6, Section 3 and ABT 06, Chapter 6, Section 3 is identical.

[2] At the time of writing, the judgments have not yet become final and may be appealed.

[3] AB 04 Chapter 1, Section 13 and ABT 06 Chapter 1, Section 12. AB 04 /ABT 06 Chapter 4, Section 3 and Chapter 5, Section 4.

[4] However, the predecessor to this provision, Reservation 2/71, has been tested in the Court of Appeal of Skåne and Blekinge in case no. T 188-76.

[5] In the draft new standard conditions of contract, AB 25 and ABPU 25, references indicate that comparisons should be made with the contract sum.

[6] The wording of the provision does not preclude the possibility that the employer may also assert a right to change the agreed price, in which case the question of compensating the customer for any costs does not arise.