Construction Law Attorneys

Are Written Change Orders Needed to Collect for Extra Work?

Construction contracts universally contain a requirement that any change order or extra work order be in writing and signed prior to the work being performed. Generally, when project directives are issued that change the scope of work but no formal written change order is issued or amount for the change agreed to, it leads to a constructive change. Such constructive changes have long been the subject of much dispute in the construction industry.

However, the California Appellate Court for the first district in Ted Jacob Engineering Group, Inc. v. The Radcliff Architects (2010) 187 Cal. App.4th 945, 114 Cal.Rptr.3rd 644 held that when the parties agree to a sum for a certain scope of work and the work changes during the course of the project that even though no written agreement was signed by both parties for the change in scope and the cost thereof, it is understood that the contractor may either stop work or proceed and subsequently pursue fair and reasonable compensation for such work.

The Court stated that: “[t]o hold otherwise would compel a contractor to walk off the job in the face of what it believes to be major changes in the scope of work required of it with significant consequences if its judgment is later proven wrong, or alternatively forfeit any right to seek compensation for that work, regardless of the extent of the additional burdens imposed.” Id. at 966

The Court also found that, even though there was a requirement that all changes in scope of the work and compensation therefore be put into writing prior to the work being performed, the oral direction to make the changes coupled with the contractor performing the work constituted a waiver of the requirement of a change order in writing.

The Court did indicate that such a determination would only be applied where there was an absence of a contrary contractual provision. Thus, owners and general contractors should be modifying their contracts to contain a provision that specifically requires not only that all change orders be made in writing with an agreed price prior to any change but something to prevent the contractor from unilaterally claiming changes made at the end of the project.

Perhaps a provision should be included requiring that if the contractor believes it is being required to make a material change in the scope of the work and it is entitled to compensation for such extra work it must make a written claim detailing what the change is, why the change is material, what it claims as the cost for the extra work, and do so prior to performing the work. The contract might also require that no work be performed until the owner or contractor in writing agrees to allow the contractor to do the work for the price indicated, disagrees with the characterization that the work is a material change but allows the work to be performed and agrees to dispute the claim after the completion of the project or agrees the change is material but disputes the cost for the change and agrees to dispute the amount after the completion or disagrees that the change is material or the that the cost is appropriate and has the work performed by another contractor with the understanding that it will back charge the original contractor for the amount of the work and dispute it after the completion of the project. This will allow the owner or general contractor to determine if it wants the contractor to go forward with the work at the price stated or take some other position without a claim they waived their right to do so.

Construction contracts should be reviewed and revised by a competent attorney prior to each project so that changes can be incorporated to fit the ever changing laws.