One constant in the construction industry is the certainty that changes will take place during construction. Construction rarely proceeds as planned because there are always unexpected events and conditions that occur during construction, affecting the contractor’s ability to complete the project on the planned schedule and in accordance with the planned scope of work. Even with the most thorough planning, construction projects often must accommodate necessary changes. Unexpected circumstances – those beyond the consideration of the contracting parties when they initially formed the contract – will usually lead a contracting party to pursue adjustments of the agreed cost, time, or work requirements of the contract.
Whether unexpected circumstances are deserving of contractual adjustments largely depends upon: 1) whether such change was truly unexpected and beyond the normal conditions of the construction process so as to fall outside the scope of the contract; and 2) whether the risk of such circumstance, if unexpected or abnormal, was owed expressly or impliedly by the contract to either party.
Examples of unexpected circumstances that will often merit contractual relief includes: 1) owner-initiated changes to the project that affect design or construction performance or completion; 2) circumstances beyond the control of the parties, such as weather conditions; 3) ) design deficiencies, unavailability of specific products or suitable material, construction interferences, or impracticability of construction methods; and 4) contractor-initiated changes accepted by the owner.
In the absence of a contractual clause that addresses the subject of changes or extras, a contractor who performs work beyond the scope of a contract can look for relief under the implied-in-fact contract theory. In Fox v. Mountain West Elec., Inc. (2005), the court upheld a subcontractor’s entitlement to recovery for changed work based on a finding of implied-in-fact contract. The issue in the implied-in-fact contract theory is whether work is truly extra or additional in relation to the contractor’s scope of the undertaking, and is usually fact-specific. For example, in Bellom Wrecking & Salvage Co. c. Rohlfing (2002), a demolition contractor sought under the implied-in-fact contract theory to recover for the cost of performing extra and additional work in removing concrete foundations. The owner argued that the work was within the scope of the demolition contract. The court found that the additional work was necessarily required in the performance of the contract, arising from unanticipated conditions. Furthermore, where the contract itself is ambiguous as to scope of the work to be performed, admission of extrinsic evidence may be used to resolve the ambiguity and determine if the work would be considered extra or additional.
The good news is that you have some control over this issue whether you are the owner or the contractor – but the proper time to address the issue is in contract formation, not once the change becomes necessary. Contracts should always contain detailed change order provisions and provide for the method of submitting change orders for approval prior to actual performance of the change. A proper change order, where possible, will detail the scope of the change, give a price for the change and, if necessary, a time adjustment for the change. Following this procedure and having the change order signed off on before the work is done will prevent, or at the very least significantly minimize, disputes over change order during and after completion of the project.