It seems like whenever we are several months into an economic recovery, constructions disputes become more common. Change orders are one of the most litigated issues in contract or construction disputes. Did they agree upon a change or not? Is this item an extra cost or is the change covered by the original price? Or was it off set by other deductions?
Most contracts are designed to prevent these disputes: a typical contract requires that all changes must be in writing. Changes include both additions to the project and items removed from the project.
So why are there disputes? I hear many reasons: We had a gentlemen’s agreement. I didn’t think there would be any extra charge. I thought the change was part of the original price. We were in a rush, a decision had to be made on the spot in the field. We agreed to do change orders at the end of the project.
Whatever the reason, not dealing with change orders properly can be costly. As an example, our Court of Appeals just issued an opinion allowing compensation for change orders that were not reduced to writing. They based their decision on sworn statements signed by the contractor and approved by the owner. The sworn statements included the changes, if one looked closely. The owner didn’t.
Following the written change order process will avoid many disputes. In these days of hyper-connectedness, if you do not have time or opportunity to reduce a change order to writing, at least exchange e-mails on your smart phones with authorized persons on both sides to confirm what will be changed, changes in the time for completion, and what it will cost!
