Even on modestly sized projects changes are inevitable and a project is rarely constructed exactly as originally designed. The reasons for changes in the work are as numerous as the stars in the sky. However, one certainty is that entitlement to additional compensation for changes is a frequent battle ground for construction disputes.
Several areas of the contract will address changes. Of particular importance is how a contractor perfects a claim for compensation for a change. Pity the contractor that has performed work clearly outside the scope of his contract only to see his claim be lost because he failed to perfect his claim under the contract. Your lawyer cannot argue a claim for compensation because of a change if the claim was not perfected. Therefore, it is imperative that a contractor know how a change claim is perfected.
A contract should state the “who, when, and how” of change claims:
- Who is authorized to direct changes?
- When is the deadline for submitting claims for changes?
- How must those claims be submitted?
Who is authorized to direct change orders?
The contract should state who is authorized to direct changes in the work. In First General Construction Corp., Inc. v. Kasco Construction Co., Inc., the Federal District Court for the Eastern District of Pennsylvania held that verbal directives to perform additional work from a person not authorized to approve extra work are insufficient to support a claim for additional compensation related to that work. In First General, the Court granted summary judgment in favor of the defendant on a subcontractor’s claim that it was entitled to compensation for additional work directed at the behest of defendant’s project superintendent. The Court held that the only person from defendant that was authorized to direct such work was the project manager and the directive in question came from the project superintendent.
Therefore, the contract should be clear as to which persons are authorized to direct the work. Contractors should follow directives only from those authorized persons and when the directive comes from a non-authorized person should confirm the directive from the person that is authorized.
When is the deadline for submitting claims?
Contracts will typically require written notification on claims for compensation to be submitted within a certain time period. The time period can range from between 7 to 21 days after a contractor is aware of an event giving rise to a claim. Failure to provide notice within the prescribed time period may result in a claim being barred. Therefore, contractors should be wary of any such notice provisions and deadlines for making claims for changes.
How must the claims be submitted?
Knowing how claims are submitted is just as important as knowing when they must be made. Typically, the contract will require claims to be made “in writing.” Contractors should take care to learn what the written notice must include in order to validate the claim. Moreover, to whom is the claim being made? Is it to the architect, the construction manager, the owner, or some combination of them?
Of course there are exceptions to these rules, but why make claims for entitlement more difficult to prove; especially, when the burden of proof in demonstrating the exception applies is on the party claiming the exception.