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                          Verbal change orders — actions speak louder than words Question: We are a general contractor specializing 
                    in ground up construction of chain restaurants. The project 
                    owner is an out-of-state corporation, one who ultimately sells 
                    the property and improvements to a franchisee once the project 
                    is completed. Typically, during the construction phase the 
                    franchisee periodically inspects the jobsite and observes 
                    progress. The corporate owner has a local project manager 
                    who acts as the owner’s representative and we deal directly 
                    with him for everything. Our contract, as is typical with 
                    most contracts we enter into, requires change orders to be 
                    in writing and must be signed before any of the work is performed. 
                    It is spelled out in the contract that if we are to get paid 
                    for these extras, we must follow the procedure. 
 On this particular project, the franchisee was more involved 
                    than he should have been. Initially, he would arrive and make 
                    suggestions for simple things, which we were willing to do, 
                    but told him that he must first have the project manager issue 
                    a change order to make it official. We got change order documents 
                    for some of the work and those are not in dispute. But things 
                    got a little sloppy and we just ended up with a lot of verbal 
                    approvals from the project manager, with the paperwork following 
                    a week or so later. These are not in dispute either. As the 
                    project started to take on a recognizable form, the franchisee’s 
                    change requests increased in frequency and intensity.
 
 To make matters worse, the project got delayed because of 
                    an equipment delivery problem, which was no fault of ours. 
                    The project manager asked us to help him get back on schedule 
                    by performing numerous changes requested by the owner without 
                    waiting for the written change order documents. He assured 
                    us that he would create the necessary paperwork to match the 
                    completed changes after things settled down.
 
 Then, as the project got back on schedule, we even started 
                    getting email change requests from the franchisee, which we 
                    forwarded to the project manager. If the project manager was 
                    at the jobsite, he would sometimes tell our foreman to go 
                    ahead with the franchisee’s extras. A couple of times, 
                    our crew first went ahead and did the extras because the work 
                    was ready to go forward, and then showed the project manager 
                    what they had done and he seemed okay with it. Now the project 
                    is nearly over and we were told that we were not going to 
                    get any additional money for the changes requested by the 
                    owner or the franchisee because we didn’t get it in 
                    writing ahead of time.
 
 The project manager told us his corporate management won’t 
                    budge on this, despite our good faith efforts to follow the 
                    project manager’s directions. We feel we got tricked 
                    by the project manager, whether it was intentional or not, 
                    and we are out approximately $75,000 for the extra work. The 
                    whole situation doesn’t seem right, but we did sign 
                    a contract and we did knowingly go against the contract terms. 
                    Do we deserve payment, or should we let it go and chalk it 
                    up to a hard lesson learned?
 
 Answer: Your story is one that I am sure 
                    many readers can identify with. First, you need to understand 
                    the difference between true “change orders” and 
                    “extra work”. A change order alters the original 
                    contract by increasing, decreasing, modifying or eliminating 
                    some aspect of the contracted work. True “extra work” 
                    means work that is outside of, and entirely independent of, 
                    the contract.
 
 The parties did not originally contemplate “Extras” 
                    when they made the contract and not controlled by the contract. 
                    In reality, it is not often clear-cut and the words are used 
                    interchangeably in the industry. An example of a true extra 
                    may be if your scope of work did not include landscaping, 
                    and the owner came to you later and asked you to do that work. 
                    Agreements to do true extras may be considered separate contracts. 
                    If the extra work is successfully argued to be a new agreement 
                    and not part of the original contract then it would not be 
                    subject to the contract’s written change order procedure.
 
 Also, many contracts expressly allow an owner to add to, or 
                    expand, the scope of work relating to the project. So, in 
                    the example above, a contract with that type of language may 
                    allow the addition of the landscaping under the original contract. 
                    But, even if you are dealing with true change orders, all 
                    hope is not lost. While it makes life easier to get all change 
                    orders in writing before you do the work (even if the contract 
                    does not require it) there may be two strong arguments that 
                    you should be paid despite the lack of written change orders. 
                    First, the project manager’s suggestion to temporarily 
                    suspend the written change order requirement can be considered 
                    a modification to the contract’s change order procedure. 
                    A written contract can be modified orally if the parties carried 
                    out the oral agreement.
 
 In your case, you both agreed to do 
                    the work before the change order papers were prepared. And, 
                    both parties carried out the oral agreement to modify the 
                    procedure — he verbally ordered the changed work, and 
                    you performed the changes without the paperwork. Second, the 
                    project manager’s conduct may have waived the owner’s 
                    right to enforce the written change order requirement for 
                    the franchisee’s changes. It is established in construction 
                    law that the parties, by their conduct, can waive the written 
                    change order requirement by assenting to a change in the contractor’s 
                    work. In your favor are the emails that you received and forwarded 
                    to the project manager. Thus, he was aware of the change requests 
                    made in advance of your performance. And, then he either gave 
                    a verbal approval for the work to be done, or viewed the work 
                    that was done after it and accepted it without complaint.
 
 So, in effect, you could argue that his conduct (approving 
                    the work before or after it was done) showed assent to the 
                    changed work and thus, waived the requirement for written 
                    change orders. Unfortunately, many contractors don’t 
                    realize that these, as well as other laws, exist. They think 
                    they have no rights if they fail to get written change orders 
                    when required by contract. If you want to get paid, you need 
                    to firmly stand up for your rights and offer to resolve the 
                    matter, perhaps suggest mediation. If they do not agree, let 
                    the owner and franchisee know that you are not afraid to file 
                    a lawsuit to collect. Throughout this process, you need to 
                    keep in mind the deadlines for recording a mechanic’s 
                    lien and then foreclosing on it, which you will want to do 
                    along with any breach of contract type lawsuit you may file.
  • • •Disclaimer The information in this article is based upon California 
                    law and is for general information only. Any information or 
                    analysis presented here is intended solely to inform and educate 
                    the reader on general issues. Nothing presented or referenced 
                    to, regarding facts, documents or applicable laws, constitutes 
                    legal advice. Before acting or relying on any information, 
                    including any information presented here, consult with a qualified 
                    attorney for your specific situation.
 
 Scholefield holds an active PE license in Colorado, an undergraduate 
                    engineering degree from the University of Florida, and received 
                    her JD from the University of San Diego. Source Code: 20080418tca
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