Change orders are a routine part of construction. No matter how much you try to plan ahead, you can never foresee every possible event. When work is altered, there is always additional cost and the additional costs can run as high as 10% of a construction budget.  Unfortunately, change orders are usually the most contentious issue amongst all parties: the designer, the builder, and the owner.  The general rule is that changes must be in writing.

Most construction contracts contain a requirement that the contractor is entitled to extra compensation only if, the extras or changes to the original scope of the contract, are authorized in writing before the start of this work. The construction industry isn’t always about protocol, rather it’s about keeping the project moving. Thus, changes are often directed orally with the promise to put it in writing later. In order to minimize disputes over modifications based upon orally directed changes -maintain a written record of changes (such as, daily logs, time sheets, costs reports, schedules, letters, memos, emails, etc.). Failure to follow change order protocol can lead to substantial claims and litigation in the long run. Parties also should be aware that there are 3 exceptions (waiver, estoppel, ratification) to the written change order requirement.  It is presumed that a person knows their rights and that those rights are voluntarily relinquished if they are not asserted at the time. Thus, a waiver can result from oral statements or promises made by a person with actual authority which is intended to induce the contractor to perform extra work.  There must be evidence that the party based his actions strictly on the reliance of truth and that the party in so doing suffered damages. Estoppel requires the victimized party to show both inducement and detrimental reliance.

Finally, we have Ratification which is an “after the fact” authorized approval of an unauthorized act. This approval creates a binding commitment that would not otherwise be binding in the absence of such approval. Although there are exceptions to the requirements of a written change order, the best practice should be to always get the change order in writing before commencing work, in order to avoid any possible future disputes and unexpected costs.

For more information, contact Richard J. Schoenfeld, Esq.