Thursday, February 27, 2014
Oral Change Orders
Every construction project deserves a written contract. For residential work, 31 states and the District of Columbia require a written agreement.
But what about contract changes? Is a written change order required every time you do extra work?
First, let’s be practical. Oral change orders are poison. The worst construction contract disputes I’ve seen are jobs with dozens of changes and little or nothing in writing. If there’s a falling out with the owner, every oral change to the contract comes into play. Who said what and when? At what price? Don’t get into a mess like that.
But suppose you forgot to get a written change order. Can you still collect? The answer is “yes,” but with some important qualifications.
Four states (CA, ME, NJ, PA) and the District of Columbia require that changes in home improvement contracts be in writing. Without a written change, contractors have no right to collect the contract price. But notice the words “contract price.” I’ll get to that shortly.
In the other 46 states, you have the right to collect something for changes, even if the contract specifies that change orders have to be in writing. An owner can’t sit back until work on an oral change order is done and then refuse to pay. That’s the rule in most states, including: AL, CO, CT, FL, HI, IA, ID, IN, KY, LA, MD, MN, MO, MS, NC, NV, NY, OH, OR, RI, SC, SC, TN, UT, VT, WA, WV. An owner who knows about a change and doesn’t object is going to have to pay for extra work.
But don’t expect to collect the full contract price. When there’s no written agreement on a change, the law implies a new contract for the reasonable value of any extra work. You’ll have to prove reasonable value: the cost of labor and materials plus something for profit. That’s never easy. But it can be done.
The Best Plan
Include a blank change order form in your contract. That's required by law for home improvement work in California and Maine. If you use Construction Contract Writer, simply click a box to put a blank change order form in your contract – what’s included in the change, what’s excluded, the cost, the new contract price, and an agreement to pay in full for extra work when the extra work is done. When you agree to make a change to any job, whip out that form and start writing. There’s a space on the form for an owner’s signature. Getting a signature is best. But simply delivering an unsigned form to the owner should be enough to seal the deal. Absent special circumstances, failure to object to a written change order is as good as accepting the change. That’s the law.