Get It In Writing: Why Written Change Orders Are Important
A recent Ohio case demonstrates the need for contractors, owners, and everyone else working on a construction project to make sure they get their change orders in writing. In the case in question, the plumbing contractor ABV entered into a contract with a homeowner to convert the home from using a septic system to running on the county sewer lines. On the very first day of the project, an inspector came to the home and determined that additional work needed to be performed.
ABV’s contract dictated that it could only be modified through written change orders. Despite that provision, ABV only communicated orally with the homeowner regarding the additional work. ABV orally communicated that extra work had to be done, and that the extra work would be performed on a time and material basis. After these communications, ABV performed the additional work. However, after the additional work was performed and ABV issued a revised invoice reflecting the additional work, the homeowner balked at the increased price (more than double the original estimate) and refused to pay anything more than the original price quoted by ABV.
The Eighth District Court of Appeals reviewed the case, and in the end they eventually found in ABV’s favor, finding that the homeowner and ABV had waived the written change order provision, because the owner was aware of the additional work and consented to it, even if the homeowner didn’t know the exact price. Waiver law is good law, but it is old news. Because of this, there aren’t many articles, if any, written about this case. However, this case has a great lesson contained within, maybe a few lessons.
First, for contractors, follow your contract terms. In addition, if your contract requires a change order in writing, get it in writing! A writing doesn’t have to be an actual change order, but at the very least you can get the basics done in an email or a text with the owner. That would have been more than enough in this case to rebut the homeowner’s contention that he wasn’t aware of the additional work.
Instead, ABV was forced to spend untold amounts of attorney’s fees in order to be paid. All for a dispute over about $11,000. I can almost guarantee that the attorney’s fees and costs in a case like this exceeded and maybe doubled or tripled the amount in dispute. That is all in addition to the time constraints placed on the owners of ABV in having to be involved in the lawsuit, appearing for depositions and hearings, and the mental energy spent by ABV on the lawsuit instead of finding and performing work. And it all could have been avoided if the owner had just spent a few minutes shooting out some emails and texts after the initial conversation with the owner.
As a contractor, the next time your scope of work changes, make sure that at least the big pieces of the change order are laid out in writing, including what new work will be performed, and the cost for that new work. If you don’t you could be left facing the difficult decision of letting an owner have their work for free, or paying an attorney to get you your money, only to find that the attorney cost more than the amount you were owed. Even though time is money, in the case of change orders, contractors should take their time and get them in writing.