Saturday, February 27, 2016

Changes: Here Comes the Judge


Tom and Denise Ambrose wanted to add a pool to their home in Carmel, Indiana. They selected Dalton Construction to do the work. Dalton’s plot plan for the pool was approved by the city. Just to be sure, Dalton laid out the pool outline on the ground using metal stakes, string and orange paint.

When Dalton’s excavation crew arrived on site to begin work, Denise had a problem. The pool layout was wrong. Dalton re-staked the pool where Denise wanted it. And that’s where the pool was built. Tom and Denise monitored the work almost every day and never said anything more about location of the pool. But when a subcontractor began making stress cuts in the freshly poured concrete deck, Denise turned irate. The cuts were not like a neighbor's pool deck! And the concrete was the wrong color. Denise told the subcontractor to stop work.

Dalton Construction met with Tom Ambrose a few days later to get the job back on track. It wasn’t going to happen. Ambrose demanded that Dalton demolish the pool and replace it with a pool with squared corners. Ambrose refused to pay the $21,775 still due until the pool was replaced and refused to let Dalton finish the work or call for final inspection. Dalton filed a mechanic's lien against the property and won a judgment at the trial court for the $21,775 plus $42,525 in costs and attorney's fees.

Ambrose appealed, claiming the trial court’s decision was contrary to Indiana Law. He had some good points. The pool was built in the wrong place. True, Denise asked for that change. But any oral modification of their contract was invalid for two reasons. First, the contract prohibited oral changes. Second, Indiana Code § 24-5-11-10(d) prohibits enforcing oral changes: "modification to a home improvement contract is not enforceable against a consumer unless the modification is stated in a writing that is signed by the consumer." There was no written change order.

What Would You Decide?
Is Dalton out the $21,775 plus $42,525 in costs and attorney's fees for agreeing to an oral modification of contract?

Earlier this month, the Court of Appeals of Indiana sided with Dalton (2016 Ind. App. LEXIS 35), mostly on technical grounds: First, the location of the pool was not in the contract. So there was no oral modification. Second, Ambrose didn’t raise the argument about Section 24-5-11-10 during trial. In the opinion of the court, arguing that point on appeal was too late.

What can you learn from Ambrose v. Dalton Construction? That’s easy. Oral changes are toxic. Get every change in writing. A written change order could have saved Dalton Construction five years of legal wrangling. 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. Any time you agree to make a change, whip out that form and start writing.