As a general contractor, your company is building an addition to a home owner’s property. Your home owner client has requested and paid for several change orders throughout the course of the Project. None of the change orders performed by you and paid for by the owner have been memorialized in a written change order due to the time constraints placed on your schedule and the generally good relationship you enjoy with the client. When the project is nearly complete the client asks you to build a tiki hut in the backyard that was not part of your original scope of work. You run the numbers, give the client a verbal quote for the tiki hut and the client agrees to your price. You build the tiki hut and provide the owner with your final invoice including the tiki hut. However, the owner declines to pay. Apparently, the owner did not clear the tiki hut with his wife and she’s refusing to pay a penny more than the original contract price. Even worse, the owner’s wife is a lawyer and she’s read the construction contract, which clearly states all change orders must be in writing to be valid.
Can you still get paid despite the contract language requiring all changes to be in writing? Depending on the jurisdiction, the answer is potentially yes, you may still be paid for your work performed for the verbal change order under the doctrine of waiver. Although there are several arguments you might make in favor of getting paid, the most obvious is that the owner waived its right to enforce the written change order provision by requesting and paying for several verbal change orders throughout the project.
The elements that must be established to prove waiver of a contractual right, generally speaking, are: (1) the existence at the time of the waiver of a right, privilege, or advantage (i.e. change orders were to be in writing to be valid); (2) the actual or constructive knowledge of the right, etc.; (3) and an intention to relinquish that right, privilege, or advantage (i.e. the payment for prior change orders that were agreed to verbally).
One court found that even where a contract provision stating that the written change order requirement could not be waived, the parties waived the provision by their prior course of conduct which included several verbal change orders. Additionally, some courts have found that when change order work on a private project is required for proper functioning of the project no writing is required regardless of what the contract may say. Finally it should be noted that the avoidance of a contractual requirement that all change orders must be in writing will likely be a lot tougher, if not impossible, on a public project. When the owner is a public entity the law is often designed to protect the public and funds are frequently approved by a public body and/or the legislature. Thus, verbal change orders are often found invalid in such circumstances.
The lesson is clear: the best practice is to get change orders in writing, signed by the owner, and to spell out each and every relevant term of the deal in your change order, including, your new scope of work, the pricing and time of performance. If you cannot get a written change order on a private job, all hope is not lost. The common law has long recognized alternative avenues to payment such as waiver depending on your particular jurisdiction.