# What do you think of the rising cost of Freon?



## thom (Nov 3, 2006)

If a retail business ran their operations like ElectricLight demands, they would be out of business. 

Where does the funding for inventory come from? Why does a customer have a right to savings that were gained at the expense of the contractor?

This was an issue in the grocery business 40 years ago. prices were rising 12% annually, stores had a 6X annual inventory turnover, and gross profit was .75% of sales. Had stores priced as electric light insists, every year they would have needed a cash infusion of 8% of inventory (in addition to all earnings being retained) just to stay even.


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## plummen (Jan 9, 2010)

Im still waiting to see what you sell materials off your truck for mr.light :whistling
So according to yourv logic I should still be able to buy a 1955 chevy for the same price as it costs in 1955 if I buy it from the origional owner since thats the price he paid for it!:laughing:


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## plummen (Jan 9, 2010)

Electric_Light said:


> The question solicited for opinions on refrigerant gas prices. I put in my opinion.
> Price gouging will likely ensue and its my opinion that customers should scrutinize every word in maintenance agreement, then run it through their lawyer.
> 
> I'm not really discussing about resi contractor vs homeowner situation where the contractor usually dictate the terms of contract unilaterally and demand "here's what we expect as your service provider, you take it our way or find someone else".
> ...


Okay how about if they go out and buy new jugs of freon just for that job and lock their old stuff in a wine cellar,would that make you happy?:laughing:


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## plummen (Jan 9, 2010)

So when you run a service call do you stop and swap out all the materials on your truck everyday to make sure youre charging customers the most current stuff for the price you paid that day?
Id hate to think youre not charging the exact price you should be or youre ripping people off just like the other guys youre complaining about!
Thats the funny thing prisons are full of guys who rob banks,but theyre also full of guys who rob gas stations and kwik shops.
Think about that for just a second :thumbsup:


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## Tinstaafl (Jan 6, 2008)

plummen said:


> So when you run a service call do you stop and swap out all the materials on your truck everyday to make sure youre charging customers the most current stuff for the price you paid that day?


Nope. :whistling



Electric_Light said:


> I locate omissions and errors in contracts and make warranty claims go through in favor of customers


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## beenthere (Mar 5, 2009)

> my reasoning was to prevent contractors from stockpiling on refrigerants (or other commodities) for explicit purpose of buying them up as an investment like stocks or precious metal and flipping on maintenance contract customers as a profit center.


Your point is you don't think HVAC contractors should be allowed to make money. Because you apparently can't do the same thing.

I have no idea why you make any of these threads in the HVAC Contractors forum. Your advise is for non contractors. Go give them your advise.

I know where there is $250,000.00 worth of copper pipe(that was its value when it was bought 7 years ago). Its being sold at todays copper prices. And OMG, its a plumbing company doing it.

I also know of an electrical company. Sitting on $150.000.00 of conduit it over bought for a job a few years back(ain't talking about little 1" to 2" emt). It will also be sold at todays price for it.

Seems every contractor but you makes money this way.


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## plummen (Jan 9, 2010)

Tinstaafl said:


> Nope. :whistling


Then youre apparently making money just like the people you complain about. :whistling


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## beenthere (Mar 5, 2009)

Tinstaafl said:


> So you dig up an eight year old case of a company violating what looks to be essentially a cost plus contract to justify your opinion that I shouldn't be allowed to sell materials I have in stock at current market value?
> 
> Wow.



That reminds me of an oil company here. The company got a gov contract to supply diesel fuel for a 3 year road construction project, at X per gallon for the entire 3 years. Before the end of the first year of the contract, new owners took over. Before their second year they were paying more for the diesel then they were selling it for, due to the oil speculators. By as much as 75 cents a gallon. there was no clause for them to get out of the contract without paying penalties, and no clause for them to get more money for the fuel.

They ended up having to sell out to another company to keep from losing their house.


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## Dr Heat (Dec 25, 2008)

Boys,

this thread was closed once because we payed too much attention to an electrician. If you ignore him maybe he will go away and we can maintain an intelligible industry specific discussion that may benefit the trade.


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## beenthere (Mar 5, 2009)

Dr Heat said:


> Boys,
> 
> this thread was closed once because we payed too much attention to an electrician. If you ignore him maybe he will go away and we can maintain an intelligible industry specific discussion that may benefit the trade.


I think it is this thread your thinking of, that still is closed. It ran its course.


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## Electric_Light (Nov 25, 2007)

thom said:


> If a retail business ran their operations like ElectricLight demands, they would be out of business.


This isn't 7-11. When you walk into 7-11, you look and decide what to buy on the spot. There's no contractual obligations on either party. 



> Why does a customer have a right to savings that were gained at the expense of the contractor?


I didn't say its a God given right. It's a specific stipulation in contract that you have the opportunity to accept or not accept. If you agreed to the terms of contract, you voluntarily agreed to it out of your free will. 




plummen said:


> I should still be able to buy a 1955 chevy for the same price as it costs in 1955 if I buy it from the origional owner since thats the price he paid for it!:laughing:


If that's something you two agreed on and the contract is still valid, he is obliged to sell it to you for that price. Just because the market value dramatically increased between now and when the contract was put into place doesn't absolve his legal obligations under the contract and allow him to weasel out unless you agree to it or there's a specific provision in it. 




plummen said:


> Okay how about if they go out and buy new jugs of freon just for that job and lock their old stuff in a wine cellar,would that make you happy?:laughing:


They can, but they won't be able to pull off unjust enrichment(with respect to contract language) on you. 



beenthere said:


> That reminds me of an oil company here. The company got a gov contract to supply diesel fuel for a 3 year road construction project, at X per gallon for the entire 3 years. Before the end of the first year of the contract, new owners took over. Before their second year they were paying more for the diesel then they were selling it for, due to the oil speculators. By as much as 75 cents a gallon. there was no clause for them to get out of the contract *without paying penalties*, and no clause for them to get more money for the fuel.


It's called a contract, because every party is held accountable to the terms of contract. It's not a contract if any party can weasel out and wash their hands of their obligations when it becomes unfavorable for them. 

If it was the other way where the contract resulted in the customer being $1.00/gal disadvantage from sourcing elsewhere and the customer chose to source it elsewhere, you bet that contractor would be holding customer's feet to fire for breach of contract. 



> They ended up having to sell out to another company to keep from losing their house.


So that contractor gambled and lost. As it turned out, it was causing them to be at $0.75/gal disadvantage. If it was the other way around, the customer would have suffered increased project expense by $0.75/gal due to that contract. 

Customer made an offer to provide fuel for xx years with $xx/gallon as consideration. That oil company accepted. Contract law doesn't say anyone gets to weasel out when it becomes unfavorable for them. 

So whichever side you're on, when it comes to foreseeable future unexpected price volatility its just a smart thing to renegotiate contract mutually or, carefully scrutinize existing contract and make necessary amendments before agreeing to renew it.


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## beenthere (Mar 5, 2009)

[QUOTEIt's called a contract, because every party is held accountable to the terms of contract. It's not a contract if any party can weasel out and wash their hands of their obligations when it becomes unfavorable for them. 
][/QUOTE]

Common sense law(all 50 states have it on the books) has voided/nulled more then one contract.


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## Electric_Light (Nov 25, 2007)

beenthere said:


> [QUOTEIt's called a contract, because every party is held accountable to the terms of contract. It's not a contract if any party can weasel out and wash their hands of their obligations when it becomes unfavorable for them.
> ]
> Common sense law(all 50 states have it on the books) has voided/nulled more then one contract.


Such would be "if you're late on payment we'll take your first born as penalty". That guy who had to sell off business to avoid losing his house apparently gambled legitimately and lost. Or did he sued the .gov for "that's not fair!!!"


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## beenthere (Mar 5, 2009)

Electric_Light said:


> Such would be "if you're late on payment we'll take your first born as penalty". That guy who had to sell off business to avoid losing his house apparently gambled legitimately and lost. Or did he sued the .gov for "that's not fair!!!"



He stayed on as the GM of that division. So he's doing ok as upper management.

What the former owner did is common on projects that take 3 or more years to complete.

In his case he didn't take a gamble per say. He bought the company without including a clause for that contract. Mostly because no knew oil was going to become that volatile price wise.

A lot of companies have been hurt by long term contracts.


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## Electric_Light (Nov 25, 2007)

beenthere said:


> He stayed on as the GM of that division. So he's doing ok as upper management.
> 
> What the former owner did is common on projects that take 3 or more years to complete.
> 
> ...


Business decision can lead to a loss or a gain. Hardly new. He made the decision to not include a clause. If investors knew their stocks were going to become worthless, they wouldn't buy them.. and nobody loses money. 

If the maintenance contract has been using the same wording for multiple renewals with no consideration given for material prices skyrocketing, now is the time to reword them in time for next renewal.


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## beenthere (Mar 5, 2009)

No rewording needed. Just increase price. Maintenance contracts should never be self renewing.


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## Electric_Light (Nov 25, 2007)

beenthere said:


> No rewording needed. Just increase price. Maintenance contracts should never be self renewing.


You can't say that without seeing the contract in question. 

I'm recommending that facilities purchasing and contract add something to the effect of preventing contractors from flipping something they piggybacked and charging market rate. Proper phrasing would prevent them from using list price or "current going rate" and require "invoice price" with contractual agreement to allow auditing. 

The precise technicality within the contract makes the difference between legal obligations to pay, not pay or only liable for part of the asking amount.


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## plummen (Jan 9, 2010)

How about you just let the big boys IE:contractors and their customers worry about things and you go back to making sure your bosses pencils are all sharpened to same length and pointing in the same direction in his cup on his desk?
It seems youve washed out in the electrical trade in the past now youre just here to piss on the hvac guy's parade now! :whistling


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## beenthere (Mar 5, 2009)

Electric_Light said:


> You can't say that without seeing the contract in question.
> 
> I'm recommending that facilities purchasing and contract add something to the effect of preventing contractors from flipping something they piggybacked and charging market rate. Proper phrasing would prevent them from using list price or "current going rate" and require "invoice price" with contractual agreement to allow auditing.
> 
> The precise technicality within the contract makes the difference between legal obligations to pay, not pay or only liable for part of the asking amount.



You should go to a forum that is for FM's and post there. Your post here have little bearing on HVAC topics in general, other then you like to bust on HVAC contractors.

Good FMers know when to direct purchase their own parts and material, and when not to. However, I haven't seen you post much about that, so I know you need to go to a forum for FMers to learn about the pros and cons of doing that.



> You can't say that without seeing the contract in question.


Obviously I can, cause I did. I have been involved in more contracts with FMers then you may think, and I know how to raise prices without being offensive to them, or their budget. I use to be upper management at a medium sized company. And while once in a while I had to keep the same contract price 2 years in a row, that was very seldom. 


Remember, this is a Contrators forum. You are not a contractor. Your advise is slanted toward how to look good to your bosses. And pretty much all of your advise you posted in the HVAC forums. Is how a contractor can price to go out of business. Few contractors need advise on how to do that.


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## beenthere (Mar 5, 2009)

I was in a contract once that by the exact wording of the contract, I had to install a water heater for $10,200.00 But they paid me $12,700.00 

When I infoprmed them how much more I was charging them for it, they brought up the contract. When I explained it to them, they signed the authorization, and thanked me. Now as an FMer, you should be able to figure out why they were happy to pay me that extra $2,500.00


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