Most people in construction have heard the term “change order.” In short, change orders are an amendment (i.e. “change”) to a construction contract that changes the contractor’s (or subcontractor’s) scope of work.
Most change orders modify the work required by contract documents (which can increase or decrease the contract price) or adjust the amount of time the contractor has to complete the work, or both.
Most construction contracts have a “change order” provision that sets forth the process to revise a contractor’s scope of work due to a change.
These change provisions are important to contractors because they allow the parties to agree in advance to a process for making changes to the work and pricing those changes. Both the AIA and ConsensusDocs form agreements address changes in the work.
Many contracts expressly provide that there cannot be oral modification of the contract and only written change orders signed by the General Contractor or the Owner will be binding on the parties.
However, contractors should be aware that they may be required to do changed work ordered by the owner even if they disagree with the proposed change order (either for the amount to be paid for the change or the impact on the time to complete the work).
Many contracts include a provision that allows an owner to unilaterally change the work without agreement from the contractor through a “construction change directive” or “CCD.”
When an owner issues a CCD, the contractor must carry out the change — even if the contractor doesn’t know how much they will be paid for the extra work.
Under the AIA form contracts, the architect determines the additional payment or completion time due to the contractor for the CCD.
While the contractor may assert a claim against the owner if they do not agree with the price or time, the contractor may not refuse to perform the work under a CCD or will be found to have breached the contract. Courts routinely enforce CCD provisions.
Contractors often proceed with extra work without first securing a written change order for many reasons. Are they entitled to compensation for that work if their contracts have a writing requirement? Maybe.
Under New York law, oral directions to perform extra work may modify or eliminate contract provisions requiring written authorization. (See Barsotti’s Inc. v. Consolidated Edison Co. of N.Y., 254 A.D.2d 211, 212, 680 N.Y.S.2d 88; Austin v. Barber, 227 A.D.2d 826, 828, 642 N.Y.S.2d 972.)
Additionally, courts have ruled that even a contract provision requiring written authorization for extra work can be waived under certain circumstances. (See Mel–Stu Constr. Corp. v. Melwood Constr. Corp., 131 A.D.2d 823, 824, 517 N.Y.S.2d 87.)
Figuring out whether a change order is justified (and whether you are entitled to be paid in the absence of a written, signed change order) is a complex analysis requiring analyzing specific facts of your project, including a review of the contract documents, pre-bid documents, responses to RFIs, field work orders and the parties’ course of dealing.
If you have questions about change orders or your construction contracts in general, please feel free to contact the author, Deanna L. Koestel, Esq., to set up a consultation.
Deanna L. Koestel, Esq., is a partner in the law firm of Pashman Stein Walder & Hayden, P.C. She is also a co-chair of the firm’s construction law practice, where she focuses on construction law, commercial litigation and general business law matters in the states of New York, New Jersey and Pennsylvania. Deanna’s experience on the litigation side of construction matters gives her valuable insight into drafting agreements or pre-litigation negotiation settings in order to minimize litigation risks when possible.