One of the most litigated construction law issues is whether a contractor is entitled to payment for additional work performed without a fully executed written change order. Most construction contracts state that the contractor is not entitled to payment for any additional work, unless the additional work is performed pursuant to a written change order that has been sign by the owner, contractor and the architect. The problem is that — because time is money — waiting for a signed change order is often costly so most contractors move forward with additional work based upon verbal agreements with the intention of executing a written change order at a later date.
Most of the time, no problems arise from having performed additional work without first having a written change order. The parties abide by their verbal commitments, which are then incorporated into the written change order required by the contract. Once in a while, however, an owner will refuse to issue payment for work that was performed without a written change order despite an oral agreement being reached during the project. In these situations, some courts have enforced the contract provision requiring written change orders and have denied the contractor the right to recover payment for his work.
In light of the foregoing, if you have a contract that requires written change orders, the best course of action is to stop work and wait for the written change order to be prepared and executed before performing additional work. If you do not have the luxury of being able to stop work, there are ways to protect yourself. Again — to be perfectly clear — waiting for the written change order before performing additional work is the proper way to proceed from a legal perspective. If, however, you cannot stop work, then follow these steps:
Immediately contact the owner’s representative on site and show him the change condition or additional work;
Find out whether the owner’s representative agrees with your assessment that the subject’s condition qualifies as additional work entitling you to additional compensation;
If the owner’s representative agrees with you that it could be additional work, obtain his signature on a field memo that specifies the date, a description of the condition and the owner’s representative’s acknowledgement that the situation appears to him to be a change condition.
If the owner’s representative states that he does not believe there is a change condition or if he simply refuses to sign the form identified above, issue the owner’s representative a field memo which states that you are performing additional work for which you believe additional compensation is justified.
On each day where you believe that additional work is performed, have the owner’s representative agree with you on the labor, equipment and materials used. Explain to the owner’s representative that you are not asking him to acknowledge that you are entitled to any additional payment. Instead, you are asking him to acknowledge that this equipment, labor and material list is what was used in the performance of the alleged additional work. Regardless of whether the owner eventually agrees that you performed additional work, having agreed with the owner’s representative what was used in the performance thereof will make it easier to agree on a negotiated price at the end of the work.
The reason for the contract provision requiring written change orders is to provide the owner with notice of the additional work before such costs are incurred. By following this procedure, you will have at least provided the owner’s representative with notice and full knowledge of the situation. By documenting as much information as you can when the condition is encountered and the work is performed, your likelihood of being able to ultimately receive payment for your work is increased. Not only will you have sufficient documentation that will help the the court overlook the contract provision requiring prior written change orders, the fact that you have fully documented the situation may convince the owner to pay for what is legitimately additional work once he has time to fully review and evaluate the situation.
If you should have any questions regarding handling claims for additional work, please give me a call at (203) 640-8825.