Commercial Construction Mistakes: A Costly ‘Changes in Writing’ Clause
It was a million-dollar mistake.
It also shows why commercial subcontractors on a job site must understand what’s in their contracts.
(And of course, take the steps to follow those contracts.)
The company was working for a county in central Ohio. The contractor had agreed to remove a certain quantity of contaminated soil for the public authority.
After work got underway, the contractor found more contaminated soil. Thousands and thousands of cubic yards more.
The project owner knew that the additional quantities of soil were being removed. The owner’s consultant was signing tickets for the removed soil in real time. But that knowledge and those tickets weren’t enough.
And contract language is the reason why.
Contracts usually acknowledge that it’s impossible to foresee all events, issues, and conflicts that might happen during a project.
It’s generally understood that contractors and subcontractors should be paid for additional work or get additional time required when changes arise.
But owners don’t want their subcontractors showing up at the end of a project with a bunch of “surprise” bills because of those changes.
So contracts regularly contain a “Changes” or “Change Order” clause. And the details matter.
The clause may say something to the effect of: “The Contractor shall not proceed with any change in the Work without the required written authorization…
“Failure to obtain such a Change Order before performance of any changed Work shall constitute a waiver by the Contractor of any claim for additional compensation for such item.”
Did you catch that last line?
“Failure to obtain such a Change Order before performance of any changed Work shall constitute a waiver by the Contractor of any claim for additional compensation for such item.”
That’s legalese for: “Get this *exact* document for each change in your work — and before you start performing that changed work — or else you don’t get paid.”
And that’s how things turned out for Foster Wheeler Enviresponse.
In their case against Franklin County, the owner maintained that the massive increases in the quantity of work required a written change order, even though it knew about the changes. But no written change order was issued.
The courts agreed.
And the contractor’s claim for nearly $1 million was rejected.
Commercial contractors and subcontractors shouldn’t have to lose money because of bad contract language, or at least shouldn’t lose money from not understanding that written change orders are mandatory.
If you’d like help with your commercial construction contract, fill out our contact us form. Reference this article and you’ll get a complimentary consultation with one of our legal team members. You can also find more related information in our Guide to Avoiding Commercial Construction Contract Nightmares.
