CONSTRUCTION CHANGE ORDERS

Benefits of Using a Change Order Form

 Protect Your Legal Rights as to Change Orders

How many times has this happened to you? You are perfectly happy to perform under the base contract, but the homeowner wants to make additions. You explain it will be more expensive and take more time: “No problem, go ahead and do the work.  We have no problem paying extra for it.”

In good faith, you perform the labor and materials and furnish a written change order. It is never signed. The homeowner (or business owner/general contractor/tenant on a commercial project) is either too busy or keeps putting it off. At the end of the job you bring up the change order subject again and then suddenly everything changes:  “I thought that was part of the overall contract price” or “Yeah, we agreed it would be an extra, but I didn’t think it would cost that much”, or  “This project is getting more expensive than we expected and I think we need to be more flexible on that price”,  or  “You have a lot of items that were done incorrectly on the punch list–I want that done before we talk about change orders.” On and on. 

Nip this in the bud with either: 1) a change order form signed at the time of the initial discussion or 2) at least written confirmation it is an extra and additional compensation will be paid.

 

Prevent Disputes

There is nothing more universally accepted than the Maxim: “Prevent disputes by putting it in writing.”  No one really disagrees with this obvious proposition; it is only a question of time and money.  No one wants to hire an attorney or create an agreement from scratch.  Now there is no longer an excuse as NationalLienLaw does it for you.

Our attorney has seen lawsuit after lawsuit stopped in its tracks by spending a couple of minutes and putting an agreement in writing.  Major commercial litigation has been resolved by confirming conversations scratched on note paper, a blank envelope, a confirming letter, and even a $10 million case with the major terms written down on a cocktail napkin!  Put it in writing, forget about it, and move on with well-deserved peace of mind.

He Said—She Said

A number of studies demonstrate the same group of people can watch an identical event or conversation and minutes later have divergent recollections.  Spend a half hour in any small claims court and see how the different testimony.  He says one thing and she says the opposite. Why spend the time, expense and aggravation litigating, or worse yet, someone else (whether a judge or jury), providing the interpretation?

Are Handshake Agreements Dead?

Our parents and grandparents, in more honest and straight forward times, were able to conclude their careers solely on verbal agreements: “My word is my bond”.  Good luck today.  In fact, many experienced attorneys consider a verbal agreement simply a prescription for fraud.  Putting it in writing with our change order forms is not only easy, but inexpensive. 

Change Order Forms Prepared By a Litigation Attorney

There are two types of lawyers that enforce agreements: trial lawyers and transaction lawyers.  Trial lawyers are in the trenches and get interpretations of the law and agreements every day by judges.  They are involved in real life decisions made by our court system.  On the front line, they know exactly what to put in and how to word it so their clients win.

Transactional lawyers stay in their offices and prepare contracts.  They are certainly intelligent and capable, but tend to “cut and paste” clauses without knowing their legal effect in court.  The language sounds good, but will it be enforced or upheld by the judge?  They don’t really know.  They can read cases and statutes, but that doesn’t give the entire story.

All our construction change order forms have been prepared by a trial attorney with 28 years experience in drafting documents and enforcing them in court. 

No Stationary Store Forms

There are unlimited amounts of “cookie cutter”,  one-size-fits-all change order forms on the internet.  Ours are from the private library of an attorney who has drafted and revised them over 28 years. A form may look adequate initially, but what happens if there is a dispute years later and you find out the language was ambiguous or ineffectual?  It is too late.

Change Order Templates That Stand Up

Not having a clause is just as bad as having an ambiguous one.  The trick is to cover as many issues as possible, in a simple and succinct manner, which is our goal.  This is done through our change order documents. Build in language that is just enough to protect your legal rights.

If anyone doubts the efficacy of his rule, consider the recent lawsuits against Zuckerman of Facebook.  Tyler and Cameron Winkevoss won a slight victory in court for 65 million in claiming they had an interest in the business. A small drop in the bucket if they had taken the time to insert this single paragraph (similar to what is contained in our partnership agreements):

Each partner shall have a one-third interest in the partnership, including current and future profits, loss, good will, trade names, copyrights, patents, websites, trade secrets, programming, overall market value, and all other right, title, or interest, tangible or intangible, in the current or successor business, regardless of the name, location or manner in which the business entity is held.

Shares shall be issued to confirm such percentages.

Can you imagine how much the lawsuit would be worth with that simple clause?

Sample change order clause:  Here is an example of one of many change order clauses that really protects your interests:

This work is performed under protest.  Contractor reserves the right (except as to deletions) to claim these changes are extras and outside the scope of the contract and/or drawings and specifications, with the entitlement to additional compensation.  Time for completion of the overall project will be extended ____  additional work days (if none  specified, extended for the time performing this work).  If applicable, Contractor also reserves the right to claim impact expenses (as examples, but not by way of limitation), including delay, extended overhead, supervision, overtime, acceleration, unproductive down time, rescheduling and interference with job coordination.  This work is subject to all other terms of the party’s contract.  Date of commencement depends on: submittals; material, labor, and equipment availability; scheduling; and other uncontrolled factors.  Price good for 30 days. Any requirement of a signed change order is waived for failure to sign acknowledgment that this is an extra.  Acceptance of payment on future draws will not be a waiver of Contractor’s right.   

Attorney’s Fees

 When you go to court and win, it would be nice for the other side to pay your attorney’s fees. In the American system, you only get those fees if there is a 1) consumer statute or 2) an attorney’s fee clause built into the agreement.  Our change order forms have such a provision.

Interest / Finance Charges

If you sue some for damages or to collect your money, you absolutely need a provision for interest or finance charges.  You can hope for the best if the court awards pre-judgment interest on a liquidated amount, but why take this chance?  Get what is due with certainty. Our construction change order forms have such a provision.

Don’t Sneak Any Clauses Into My Contract

Having a written change order document alone doesn’t always do the trick. What if someone slips in a clause you do not recognize and suffer the legal consequences later? Our change order forms are straight and to the point, which eliminates inserting fine print at the last moment.

Take the sad case of a farmer who was sitting on an extremely valuable piece of land in Greenwich, Connecticut being eyed by a multimillionaire hedge fund manager.  The farmer had 100 acres; 20 (Parcel A) of which was situated on his actual residence and outbuildings. There were also two separate 40 acre parcels (Parcels B and C) for is farming operations.  The problem was, he was looking at some very high death taxes because of the increased value of the property. So he came up with a simple idea: He would sell off Parcel B that would give him enough cash to take care of his heirs for the rest of their lives and not have to pay inheritance tax. But at the last moment a lawyer for the hedge fund manager slipped in a single sentence which turned his life upside down: “Buyer (hedge fund manager) shall have an option to purchase for one year as to Parcels A and C for a price and terms proportional to the purchase price of Parcel B.”

The farmer was very reasonable and the purchase price for Parcel B was only $5 million, well under market.  From a fair market value perspective, Parcells A and C. were worth approximately $50 million. But because the agreement used the word “proportional”, that fund manager was able to buy all parcels for 11.25 million.   The farmer not only lost all its property, but at a low price. That is why we always recommend using a written change order which spells out all the terms and conditions.