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Most construction contracts state that there will be no payment for changes in the work unless recorded in a signed, written change order. But when multiple entities are involved in a single project – from developers, owners, and architects to the inspectors, engineers, and subcontractors – miscommunications happen: Was the alteration really a change order or merely a clarification of the work already defined?
Whatever your role on a construction project, understand how to protect yourself when a project is altered. Here are three methods you can use to mitigate contract disputes before, during, and after a construction project.
At Hendershot Cowart P.C., our attorneys have decades of experience helping clients settle contract disputes in the construction industry. Contact our office online or via phone at (713) 909-7323 to schedule a consultation with our team.
1. Negotiate the Change Order Clause Before the Project Begins
Make sure all the entities agree on a realistic and equitable process for approving changes to the contracted scope of work before the contract is signed. Don’t rely on decades-old and often one-sided contract templates: Modify the change order, or “changes in the work”, clause for your project and make sure it is grounded in reality.
Changes to a complex construction project often occur at the last minute or in a tense situation. If a change order requires the approval of a hard-to-reach individual three time zones away, representatives in the field may be pressed into making an on-the-spot decision which, if not later approved, puts the financial burden on them and will likely lead to a dispute.
While it may seem efficient to fall back on standard templates, it can result in disputes later down the line if parties don't fully realize what the terms of their contract entail. Instead, contractors, subcontractors, and owners should negotiate a clear and equitable process for requesting and implementing change orders, and document that process in the change order provision of the construction contract.
2. Don’t Count on a Handshake – Always Get Change Orders in Writing
In the construction industry, it is common for change orders to be initiated in the field via verbal orders by the owner or the owner’s authorized representative. It may be tempting to put faith in such “handshake agreements”, but verbal agreements do not always hold up in court. One party may assume they are clarifying the existing scope of work; while another is mentally tallying up the additional days and costs it will take to incorporate the change into the project.
Before implementing any change, pause and agree on the scope of the change, decide whether it is covered by the existing contract and, if not, detail the extra work to be done and establish a price for the additional labor and materials. That may mean pausing operations for an hour or two, but holding off on work in the short term can help you avoid costly contract disputes at the end of the project.
Don’t forget to take delays into account when documenting the change order. It does little good to be compensated for extra time and labor at one end, only to be penalized later for missing a completion deadline. Consider including a default in the change order provision that allows for an “equitable amount of time” to be added to the completion date if not specified in the change order.
Finally, once your change order is in writing, don’t overlook the final step: Have all parties sign the written order before the changed work begins.
3. Is It a “Change in the Work” or Part of the Original Bid?
Sometimes, contractors will attempt to charge owners for an adjustment that doesn't technically qualify for a change order as per the terms of their agreement. Conversely, owners may argue that a change in the work was merely a clarification of work already contracted. How do you resolve the debate?
Carefully review the plans, drawings, specifications, and agreements to identify what is extra work and what is in scope. Look at responses to RFIs and field work orders. Does the contract set an order of precedence to determine whether written specifications or drawings have the final say? If owner and contractor cannot agree on whether the change is in scope or not, both parties may have to fall back on the contract’s dispute resolution process to avoid a breach.
Change Is Inevitable – Change Order Disputes Can Be Avoided
Leveraging these three methods can help you avoid contract disputes during construction jobs and help you maintain a positive rapport with all parties involved in complex commercial construction projects.
Our attorneys have the legal acumen to help you navigate contractual disputes. Contact our office online or give us a call at (713) 909-7323 to discuss your case with us and learn more about our business litigation services.
