cost

(Cost of Undocumented Change Orders) Crawford Construction & General Contractors Inc. v. Kemp

Court case Crawford Construction & General Contractors Inc. v. Kemp, in an all to familiar scenario, the Crawford Construction built a $1.3 million home for the Kemps with all of the oral change orders and adjustments that the homeowners requested throughout construction. The original contract between the parties included a requirement that all change orders be in writing. At the end of the project, and after payment by the owners for some of the changes throughout construction, the builder had a claim for an additional $605,694. Needless to say (and as implied by the title of this post) there were no written change orders documenting the changes comprising this claim.

 

The parties made the typical arguments. The contractor tried to rely on the contract and the additional oral changes in scope to recover its money. The homeowners argued (among other things that are outlined in the linked opinion) that the contract required written change orders, no such writings exist, therefore we get $605,794 worth of construction for free. When faced with these arguments the Virginia court essentially said that both sides were wrong but that the claim could move forward.

 

In coming to this conclusion, the Court stated:

 

“It is clear from counsels’ pleadings and argument that both parties mutually ignored the change order provision of the contract. Owners routinely requested additional and changed work done on their new house and the contractor routinely complied with their request.”

 

From this admonishment to both parties about following the terms of the contract, the Court continued its analysis. Essentially, the Court held that Virginia law allows parties to change the terms of a contract by word and action, but that each change constituted its own oral contract so neither party could rely on the original contract terms. For the homeowners who ignored the written change order provisions and paid for some of the changes, it meant that they could not rely on the written change order provision to avoid all payment. For the contractor which ignored those same provisions, it could not rely on the contract terms to set the value of its claim.

 

While the Court allowed the contractor’s construction change order claim to move forward, the contractor (and the homeowners for that matter) is now in an uncomfortable and uncertain position. The parties, by ignoring the plain language of their construction contract, left it to the judge to determine the content of their agreement. Because neither party followed the rules that they set at the outset of the construction project, they are both now at the mercy of the court to decide their fate.

 

In short (if it isn’t too late at this point), the parties construction attorneys are now left to argue in a vacuum and from circumstances instead of from a contract that a Virginia Court would enforce to the letter. I see cases like these on a daily basis, and not all of them are salvageable. In any event (and despite this recent opinion) written change orders in compliance with your construction documents is the best way to have certainty and to make sure that you have the best chance of recovery as a contractor should you find yourself in a construction dispute.

 

So the cost that both the owner & contractors had to deal with included time, attorney fees, job costs, a long with other substantial costs. Plain & simple, don’t make their mistake, and have all your Change Orders completed in writing!

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