Change Orders – What You Need To Know!
Extras are one of the biggest issues that cause problems in the owner/general contractor relationship or between a contractor and subcontractor. Sometimes an owner gets caught up in the construction process and orders or consents to extras without realizing the ultimate impact on the cost of the project. As a contractor you are not bidding on this work and therefore may charge more than normal for extras. In the contractor/subcontractor relationship the issue is usually whether a particular item is an extra and were the contract requirements for an extra followed.
Almost every construction contract or subcontract that I have reviewed or been at issue in litigation that I have handled has a provision requiring that extra work only be performed if authorized by a written authorization, change order. Many times the contract clause dealing with extras will even state that the authorization has to be signed by a particular individual i.e. the president of the general contractor or perhaps the project manager. When I review an agreement for a client, I always point out such provisions and warn the client that they follow the procedure set forth in the contract for change orders.
While the contract may require set procedures for authorization of extras, we know the real world and especially the world of construction does not always work the way a contract says it should. Construction work moves quickly and many times things come up in the field that are not expected. You are trying to get the work done and don’t always have time to document the request for an extra or a situation just arises that has to be dealt with then and there. You are trying to accommodate your customer be it the owner or general contractor. You go ahead and do the extra work and when it comes time for payment you are then confronted with the contract language that says you were suppose to get a written change order BEFORE doing the work. What are you do?
Fortunately for those in the construction industry and me as your lawyer, the Courts recognize that the real world is different then what parties may state in their contracts. Accordingly, an owner or a general contractor can waive the requirement for a written change order by their words or conduct. The rationale for the Courts taking this position is that the requirement for a written change order is in a contract for the protection of the owner or in the contractor/subcontractor relationship for the gc’s benefit. The owner or general may waive the protection afforded by the requirement of a written change order and become liable for extras ordered verbally or by consenting to the work being done and knowing that it is outside the contracted for work.
While the requirement for a written change order can be waived, you are going to be put to a test when you are claiming an extra was authorized either verbally or by conduct. Illinois Courts consistently hold that a contractor seeking to recover for extras must establish by clear and convincing evidence each of the following:
- The extras were outside the scope of your original contract promises.
- The owner or general contractor requested the extra.
- The owner or general contractor by words or conduct agreed to pay extra.
- The contractor or subcontractor did not voluntarily proceed with the extra work.
- The extras were not necessitated by reason of some default by the contractor or subcontractor.
While it is always best to follow the contract requirements when dealing with extras (get a written change order signed by the owner or appropriate representative of the general contractor), as you can see all is not lost if you fail to do so. However, the burden of proof is high, clear and convincing evidence. Accordingly, when you do have extras and the required procedures as set forth in your contract were not followed, be prepared to present the requisite evidence on each of the above points. If you do you will recover. If not you have given your customer a gift.