In an ideal setting the parties will abide by their original agreement and all changes will be incorporated smoothly into the basic contract work. Contractors should be compensated fully and fairly for the changes, and the time allowed in the construction schedule adjusted accordingly. Unfortunately, many projects fail to meet this ideal model. Since changes are bound to occur, the wise contractor will be prepared and will be armed with the necessary legal tools to handle these inevitable situations.
In all construction disputes the express written provisions of the contract provide the key to the rights and liabilities of the parties. Accordingly, with respect to changes, these written provisions usually will dictate which party has the basic authority to alter the method, price or schedule of the work. It is critical that the contractor make certain that the person issuing a change order has authority under the contract to do so and that the method specified in the contract is followed carefully. While courts are often liberal in interpreting the factual circumstances of a particular case in order to allow compensation, the prudent contractor always will follow the written procedural requirements of the contract and rely on “what is fair” only as a fall-back argument.
Florida courts will generally enforce written provisions restricting the authority to order changes. At times the parties’ course of dealings may authorize changes even where the actions conflict with the written provisions in the contract.
Oral change orders present a particularly difficult problem. Assuming the proper party has authorized the change, most construction contracts require the contractor to obtain written authority to proceed with extra work assuming additional compensation is expected. Unwary contractors occasionally lose money by performing additional work which the change is orally requested under assurances that the contractor would be compensated. When the contract states that change orders must be in writing a contractor should not perform any additional work until presented with a properly signed written order. Generally, if the language is clear, concise and unambiguous, this “written change” requirement will be enforceable under Florida law.
Despite the general rule that courts will enforce contracts requiring written change orders, some courts find the general rule unfair. Accordingly, certain unique situations will enable contractors to recover costs for work performed under an oral change order.
The courts address such situations by using several different legal theories to find that an owner has waived his right to insist that change orders appear in writing. As with the “authority” issue referenced earlier, courts will rely on the prior course of dealings between the parties when deciding whether an owner has waived the written change order requirement. In one case, the court held that because the owner orally ordered the work to be done, and voluntarily paid for six of the additional work items, the parties had waived the contract provisions requiring written change orders.
Despite these “waiver” situations, contractors should always request change orders in writing when the contract so requires. As a practical matter a short letter or memorandum usually will satisfy the written change order requirements.
Notice of changes is another problem area. Most change provisions also require that the contractor provide written notice of its claim within a specified period of time. Florida courts usually uphold such notice requirements. This condition precedent, however, may be waived by the parties during the course of performance of the contract.
Changes are a problem area for everyone involved in the construction industry. Proper notice, written authorization and documentation of costs are the critical elements of any change order.