Over time, judges and arbitrators have proved themselves sufficiently aware of the hurdles and imbalances contractors are often forced to assume due to the, at times, onerous change order provisions present in construction contracts. As a result of these provisions almost always requiring the owner’s written consent to changes, courts have proven themselves willing, in certain situations, to conclude that an owner has waived enforceability of the writing requirement.
For instance, when the contractor has followed many of the contractual extra work provisions, and has been able to prove that it reasonably believed that the extra work performed was authorized or necessary, courts have found it would contradict the principles of equity to force contractors to incur the extra costs where the owner is plainly enjoying the benefit of the extra work.
And thus was born a long line of cases ruling that these contractual writing requirements can be waived orally or via oral change directives, the parties’ conduct, or due to facts specific to the projects at issue. One of the more recent California cases to signal that this doctrine continues to be robust was G. Voskanian Const., Inc. v. Alhambra Unified Sch. Dist., 204 Cal. App. 4th 981, 992 (2012). There, the court found that a contractor is entitled to recover for work beyond that required in the contract where such work was necessitated by incorrect plans and specifications furnished by the owner. Because the furnishing of defective and/or deficient plans and specifications constitutes a breach of contract by the owner, notice requirements by the contractor are waived in connection with work required as a result. D.A. Parrish & Sons v. County Sanitation Dist., 174 Cal. App. 2d 406,414 (1959).
Oral Promises or Modifications Can Be Enforceable for Private Works
In the context of private works, it’s not unusual for owners or their representatives to direct changes in the plans and specifications orally. In those instances where the contractor acts upon such instructions, these changes become binding on the parties. This is true even in instances where the construction contract plainly provides that the contract can only be modified in writing. See, e.g., MacIsaac & Menke Co. v. Cardox Corp., 193 Cal. App. 2d 661, 669-670.
Note, however, that in the sphere of public works, contracts typically cannot be modified in the absence of a written change order. Such contracts are not subject to oral modification or modification via the parties’ conduct while administering the contracts. See, e.g., P&D Consultants v. City of Carlsbad, 190 Cal. App. 4th 1332, 1340 (2010).
Don’t Waive Your Impact Costs
It’s a widespread practice of owners to include language in change orders that is meant to preclude a contractor from later attempting to recover impact costs over and above those detailed in a given change order. The seminal case on this issue was Huber, Hunt & Nichols v. Moore, 67 Cal. App. 3d 278 (1977).
In those instances where the change order includes no waiver-of-impact-claim language, however, courts will assume that the price indicated in the change order covers only the listed costs of the changed work. See Appeal of Beaty Electric Co., Inc., EBCA No. 408-3-88 (1990).
Similarly, federal courts have also ruled that if a contractor doesn’t intend to waive impact costs, the contractor must expressly reserve those rights in the change order; in the absence of an express reservation, broad waiver and release lan guage will extinguish the claim. See John Massman Contracting Co. v. United States, 23 Cl. Ct. 24 (1991).
Thus, to protect themselves against waiver of impact costs, contractors must be diligent about reserving impact costs. Contractors should address the issue in each change order, and can expressly reserve their rights to avoid later ambiguities in the change order language.
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