CHANGED CONDITIONS, THE CLAIMS WHICH FOLLOW AND THE PROBLEM OF NOTICE

Introduction

One of the most difficult and, yet, often-encountered problems at our Law Offices is a client coming in trying to collect on a bill for a changed condition, which hasn’t, for whatever reason, been reduced to a signed change order. Sometimes, the amounts of money are startlingly large and perhaps necessary for a company’s continued survival. That subcontractors, general contractors and owners - and some combination of these - often keep performing extra work under oral arrangements, waiting ‘until the end of the job’ for the paperwork, is an all-too-frequent occurrence. Sometimes, a contractor will encounter a changed condition, an omission from the plans and specifications or a differing site condition and will be afraid to insist on getting a change order in writing before performing the work - which most contracts provide for, in one form or another - out of fear of annoying the general contractor or the owner or the architect with impact on time extensions and timely payments. All too often, the work is performed without anything in writing of any legal consequence. Then the job gets done, the general contractor denies the change orders, the subcontractor’s palms begin to sweat and the lawyer is given a difficult or harder assignment to work upon. While a written contract can be modified orally, even when the contract says that the contract can only be modified in writing, usually a court is going to enforce the a written contract as it is written under various rules and theories, including the parole evidence rule.

The purpose of this article will be discuss the usual requirements in changed conditions in preserving rights for compensation and some ideas on how to preserve and present claims when the paperwork is less than contractually adequate. There is going to be a lot of reference in this article to ‘case law’ (decisions from various courts), as it is ‘case law’ that defines both the requirements with notice provisions and what happens when there isn’t compliance with written contractually-required notice provisions.

Any contract’s two most important provisions

First of all, we always tell clients to read carefully the two most important provisions in their contracts before signing them and before performing work. These are the ‘changes’ clause and the ‘disputes’ clause. The ‘changes’ clause tells the subcontractor or general contractor how to present claims for changed conditions, often including within this definition differing site conditions. Typically, a notification of a changed condition has to be made in writing within a very short period of time - three days to seven days are common periods - of the contractor’s first understanding that there is a changed condition or differing site condition which is likely to lead to a claim for additional compensation. (Using federal verbiage, a claim for a change order is also considered and referred to as a request for an equitable adjustment.) Usually, most contracts require that this written notification: (a) be made prior to beginning work with regard to the changed condition; and (b) that an agreement as to compensation be made in writing before the contractor begins work on the changed condition.

The ‘disputes’ clause (or clauses or paragraphs) describes how the claim for a changed condition will be resolved, assuming the claim is not accepted for purposes of liability or amount or both. Typically, such clause (or clauses or paragraphs) will discuss what conditions precedent there are in terms of presenting the claim, whether a final decision is required from the party to whom the claim is made, when the claim must be presented and how the claim will be resolved (mediation, arbitration, court, administrative agency hearing or some combination of these methods).

Notice Provisions - necessity of complying with

First, the bad news. Most contractors get into trouble with their claims because of the fact that they did not give sufficient notice of their claim to the correct parties in time. This is probably the largest single problem that presents itself with claims. For these purposes, oral notifications have very little value because of the fact that they can not be proved (the other side is likely to deny receiving that notice) and oral notice is not what the contracts typically call for. They call for written notice. At our Law Offices, we are fond (or tired?) of saying that verbal change orders are worth the paper they are not printed on. Pick up a verbal change order/changed condition notice and look at it. It is: light to the touch; invisible; it has no smell; it has no weight; and, more importantly, quite often it has no substance or legal consequence. Massachusetts law clearly requires a contractor seeking an extra to comply with the appropriate notice provisions in the contract or risk denial of the claim. Here’s what the courts say.

In the case of Marinucci Bros. & Co., Inc. V. Commonwealth, 354 Mass. 141,144, 235 N.E.2d 783, 785 (1968) the issue was whether or not a contractor could successfully make a claim against the Commonwealth for breach of contract on a job governed by the Massachusetts Highway Department’s “Standard Specifications”. While the trial court allowed the claim, the Supreme Judicial Court reversed, holding that the failure to give the written notice of the claim that the contract required precluded the claim.

The Court held that:

“ We are of opinion that art. 58 of the Standard Specifications does apply to the contractor's claim, and that failure to comply with the notice provisions, set forth in that article, which were not waived by the Commonwealth, bars the contractor from relief. Article 58 places an affirmative duty on the contractor to make a written claim for damages . . . . The contractor argues that the provisions of art. 58 do not apply because there is no 'act of omission or commission' on the part of the D.P.W. Rather, it is argued, it was an act of the M.D.C. in revoking permission to use the original disposal areas which resulted in the contractor's damages. We disagree. The failure of the D.P.W. to perform its contractual duty is sufficient to bring the case within art. 58 as an 'omission.' The contractual duties of the D.P.W. could not be avoided because the M.D.C., also an agency of the Commonwealth, saw fit to withdraw its permission to use the disposal areas originally contemplated. The contract was with the Commonwealth and its obligations could not be diminished by conduct of the M.D.C. The effect of what happened was an omission by the Commonwealth. And the present action is against the Commonwealth. By the terms of art. 58 the failure of the contractor to make a timely claim in writing based on that omission and an itemized statement setting forth the details of the work done or damage incurred results in a forfeiture of its claim. The reasons for the forfeiture clause are set out at some length in the Commonwealth's brief. It is there argued that the failure of the contractor to comply with the provisions of art. 58 has placed the Commonwealth at an extreme disadvantage in checking the correctness of the $143,651.77 claim. But, however that may be, the provisions of art. 58 are not invalid and the respondent has a right to insist on compliance with them as a condition precedent to recovery. See Crane Constr. Co. v. Commonwealth, 290 Mass. 249, 253--254, 195 N.E. 110, which denied recovery to a contractor who had failed to comply with the notice requirements of the predecessor of art. 23. See also M. DeMatteo Constr. Co. v. Commonwealth, 338 Mass. 568, 590, 156 N.E.2d 659.”

The provisions of Article 58 were set out in a foot-note, as follows:

'All claims of the Contractor for compensation other than as provided for in the contract on account of any act of omission or commission by the Party of the First Part or its agents must be made in writing to the Engineer within one week after the beginning of any work or the sustaining of any damage on account of such act, such written statement to contain a description of the nature of the work performed or damage sustained; and the Contractor shall, on or before the fifteenth (15th) day of the month succeeding that in which such work is performed or damage sustained, file with the Engineer an itemized statement of the details and amount of such work or damage. Unless such statement shall be made as so required, the Contractor's claim for compensation shall be forfeited and invalid, and he shall not be entitled to payment on account of any such work or damage.'

As stated by the Court in the case of Sutton Corporation v. Metropolitan District Commission, 423 Mass. 200, 207-208, 667 N.E.2d 838, 843 (1996).

“It is true that contractors seeking to recover payment in excess of the contract price must follow the procedures set out in the contract. See Lawrence-Lynch Corp. v. Department of Envtl. Management, supra at 684-685, 686, 467 N.E.2d 838; State Line Contractors, Inc. v. Commonwealth, 356 Mass. 306, 317-319, 249 N.E.2d 619 (1969); Marinucci Bros. & Co. v. Commonwealth, 354 Mass. 141, 144-145, 235 N.E.2d 783 (1968); Chiappisi v. Granger Contracting Co., 352 Mass. 174, 177-178, 223 N.E.2d 924 (1967); Lewis v. Commonwealth, 332 Mass. 4, 5-7, 122 N.E.2d 888 (1954); Glynn II, supra at 394-395, 487 N.E.2d 230; Skopek Bros. v. Webster Hous. Auth., 11 Mass.App.Ct. 947, 416 N.E.2d 1006 (1981); D. Federico Co. v. Commonwealth, 11 Mass.App.Ct. 248, 252-253, 415 N.E.2d 855 (1981). In those cases, recovery was denied when the contractor failed to give timely notice of its claim to the public agency. Without such notice, the contracting authority was unable to monitor the additional expenses incurred by the contractor.”

In the case of Chiappisi v. Granger Contracting Co. Inc., 352 Mass. 174, 177-178, 223 N.E.2d 924, 926-927 (1967) members of partnership doing business as subcontractors brought action against general contractor and its surety for payment for alleged extra work performed on job. The Superior Court, Sgarzi, J., on a master's report, denied plaintiffs any recovery for alleged extra work performed, and they appealed. The Supreme Judicial Court, Cutter, J., held that under contract requiring subcontractors to give written notice to architect within reasonable time after receipt of instructions by drawing or otherwise concerning work claimed to constitute extra work, failure of subcontractors in non-emergency situation to promptly make inquiry of contractor regarding alleged extra work and to give immediate written notice to architect upon learning that situation would call for what subcontractors regarded as extra work prevented subcontractors from recovering for alleged extra work performed. As stated by the Court:

“Article 16 of the general conditions requires that written notice be given to the architect 'within a reasonable time' after receipt of 'instructions by drawing or otherwise' concerning work claimed to constitute extra work. Chiappisi, after inspecting the flute openings 'four and one-quarter inches in width' as actually installed and after talking with Gillette, knew that there might be the basis of a claim for 'extra' work. The physical presence on the structure of wider flute openings than had been anticipated was a condition at variance with Chiappisi's interpretation of the architect's scale drawing on which the bid was based. In every practical sense (viewed in the light of Gillette's contention to Alphonse Chiappisi that the roof was properly installed) the situation amounted to an 'instruction' within art. 16. Obviously, Chiappisi was expected to fill the flute openings as they then existed . In the circumstances, arts. 16 and 37 reasonably required (a) prompt inquiry by someone in behalf of Chiappisi at 'the office' as Gillette had suggested, and (b) that Chiappisi give immediate written notice to the architect, as a prerequisite of any claim for 'extra cost.' If such notice had been given, Granger might have taken steps to protect itself (after discussion with the town authorities and the architect)

against liability for what seems at least an ambiguity arising from the plans. There was no emergency requiring Chiappisi to proceed at once without giving written notice. Because Chiappisi proceeded without such notice and postponed until after the work was completed all written mention of any claim for extra work, there can be no recovery.”

One of the leading cases on “notice” is the case of Glynn v. City of Gloucester, 21 Mass.App.Ct. 390, 394-395, 487 N.E.2d 230, 233-234 (1986), which is sometimes referred to in the literature (cases) as “Glynn II”. In this case, the receiver of construction contractor sued city for additional compensation in connection with building of road. The Superior Court, Middlesex County, Joseph S. Mitchell, Jr., J., entered judgment for the city, and the receiver appealed. The Appeals Court, Greaney, C.J., held that contractor's failure to follow remedies established by contract and statute for recovery of compensation for additional or extra work warranted conclusion that additional costs were incurred unilaterally at its own expense:

“As we pointed out in Glynn v. Gloucester, 9 Mass.App. at 460, 401 N.E.2d 886: "On a public construction contract, if actions or requirements of the public agency necessitate changes in the work as it progresses, thereby causing the contractor to perform extra work or incur added expense, ... the contractor must follow the procedures spelled out in the contract ... to adjust the price before unilaterally accruing expenses to be pursued later on breach of contract or quantum meruit theories." This is settled law. See Lewis v. Commonwealth, 332 Mass. 4, 5-7, 122 N.E.2d 888 (1954); Chiappisi v. Granger Contr. Co., 352 Mass. 174, 177-178, 223 N.E.2d 924 (1967); Marinucci Bros. & Co. v. Commonwealth, 354 Mass. at 144- 145, 235 N.E.2d 783 (1968); State Line Contractors, Inc. v. Commonwealth, 356 Mass. 306, 317-319, 249 N.E.2d 619 (1969); Lawrence-Lynch Corp. v. Department of Environmental Management, 392 Mass. 681, 684-685, 686, 467 N.E.2d 838 (1984); D. Federico Co. v. Commonwealth, 11 Mass.App. 248, 252-253, 415 N.E.2d 855 (1981). The master's finding that Salvucci "submitted no written claim to the [c]ity ... for the extra costs [of the screening machine] .. with the first estimate after such costs were incurred," as was required by paragraph 22, precludes recovery on this claim in the absence of a finding that the city had waived compliance with the contract procedures. There was no such finding.”

In the case of D. Federico Company, Inc. v. Commonwealth, 11 Mass.App.Ct. 248, 252-253, 415 N.E.2d 855, 857-858 (1981) was a discussion by the Appeals Court concerning a contractor’s right to recover on an extra when it didn’t follow the contract requirements for notice. In this case an excavation contractor brought action against the Commonwealth to recover additional compensation claimed to have been owing for its work under a public construction contract. The Appeals Court, Armstrong, J., held that any right the contractor may have had to extra compensation was not perfected due to his failure to make a timely claim for extra compensation, and thus his subsequent claim was barred. As stated by the Court:

“There is a further reason that the plaintiff may not recover. It is a general rule in public construction contracts that, "if the contractor encounters materially different conditions from those predicted by the plans, specifications, preliminary borings and estimates, the contractor must follow the procedures spelled out in the contract ... to adjust the price before unilaterally accruing expenses to be pursued later on breach of contract or quantum meruit theories." Glynn v. Gloucester, --- Mass.App. ---, --- - --- 401 N.E.2d 886 (1980). The present contract is not an exception. No timely claim for extra compensation was made, and the master found that there was no justification for the failure. In these circumstances any right the plaintiff may have had to extra compensation was not perfected, and the subsequent claim was barred. Lewis v. Commonwealth, 332 Mass. 4, 6-7, 122 N.E.2d 888 (1954). Chiappisi v. Granger Contracting Co., 352 Mass. 174, 177-178, 223 N.E.2d 924 (1967). Marinucci Bros. & Co. v. Commonwealth, 354 Mass. 141, 144-145, 235 N.E.2d 783 (1968). State Line Contractors, Inc. v. Commonwealth, 356 Mass. 306, 317-319, 249 N.E.2d 619 (1969). The master's finding that unspecified "(r)epresentatives of the Commonwealth agreed that 'additional compensation would be agreed to where necessary' " fell short of a finding of "clear, decisive and unequivocal conduct on the part of an authorized representative of the agency indicating that it would not insist on adherence to the (extra-compensation provisions of) the agreement" (emphasis supplied). Glynn v. Gloucester, supra --- Mass.App. at --- [FNb], 401 N.E.2d 886. Moreover, the contract provided that "(n)o oral ... conversations with any officer, agent or employee of the Commonwealth ... before or after the execution of the contract shall effect (sic) or modify any of the terms or conditions of the contract ...."

When you haven’t complied with the notice provisions: prayers to St. Jude Thaddeus and other possible strategies *

(*For our non-Catholic friends, St. Jude Thaddeus is a patron of impossible causes. For our distaff readers, Rita Of Cascia is also a patroness of impossible causes. Always remember, that if you are working on a claim in your car, add St. Christopher!)

The best (and safest) teaching that could be given with regard to the ‘exceptions’ is to say there aren’t any. When one has a claim for a changed condition and has not complied with the notice provisions of the contract, trying to proceed with a claim for the change is akin to a drunk fat man walking backwards without his glasses and into the wind on broken stilts while blowing soap bubbles on black ice in the middle of a blizzard at four o’clock in the morning after having been awake for eleven days. Namely, the experience may be exhilarating - perhaps, nerve-wracking is the better word - but it’s dangerous as all hell and there is an extremely good chance of coming down hard on one’s (financial) backbone. A good example of the old Chinese proverb - also interpreted as a curse - ‘may you live in interesting times’. When contractors (note: the root word is ‘contract’) fail to follow their contracts, life gets interesting.

In other words, the best teaching on this subject is to assume that there is not going to be any wiggle room in any particular situation other than by following what the contract requires and guiding your actions accordingly. After all, the ‘notice’ provision in your subcontract or general contract is put there for various reasons. First of all, your contracting party is entitled - and it’s reasonable to allow them an opportunity - to take pictures, make measurements and consider whether or not it wishes to perform the contract in such a way as to necessarily incur the liability and expense of performing the work with a changed condition. After all, there might be other ways to perform the work or, perhaps, your contracting party might be interested in doing a ‘O cost change order’ where this change is recognized and some other part of the job is deleted to pay for it. Certainly, if you are a subcontractor, if you submit a claim late and without notice so as to damage the ability of the general contractor to submit its claim to the owner on your behalf with its own mark-up, there is law to say that you will not be entitled to the change because of the prejudice to the general contractor in submitting the claim late if the general is not able to recover on the change order request because it/he/she is late in submitting it under the provisions of the general contract. And, it might be that the general contractor or owner or architect might have a different way of performing the work so as to minimize or eliminate a claim for a change order other than the way you see the work yourself.

Consequently, a slavish devotion to following the ‘changes’ clause with its requirements concerning notice will help, in the main, to minimize these types of situations. Scribbles would say that the biggest problems in complying with this type of provision are three in number, based on our experience at our Law Offices. First of all, it is a rare contractor who likes (or is even willing) to send one more letter than is necessary for any particular job. One of our clients, an experienced site contractor, in talking about what he liked best about contracting says that he loves to stand in mud up to his waist with the sun beating down on his face! While not all readers will identify with this specific sentiment, it only states the obvious that contractors are not wild about writing letters. They would rather be doing something. What we try to do at the Offices is to tell (teach) contractors that writing letters is doing something about what they like to do best, which is get paid.

Apart from letter-writing angst, another major reason that contractors don’t write letters is because of the fact that they are afraid that by writing letters, they will irritate their contracting parties, which might have an adverse effect on other aspects of the job including getting paid. Our response to this is that while this might be a point with some validity, this only involves deferring an unpleasant subject to a later time - not avoiding the problem, at all - at which time the subject is even more unpleasant and your contracting party will throw it in your face that you didn’t follow the contract and, therefore, aren’t entitled to anything. Remember the old Fram oil filter commercials? The guy who said ‘you can pay me now or pay me later’? Meaning, installing an inexpensive oil filter every few thousand miles may cost a few bucks several times a year but is nothing compared with the cost of a rebuilt or new engine. The same rationale applies to this subject. No one likes to see any bill go up. But, if you don’t tell your contracting party up front, that doesn’t mean that the bill is not going to go up later. One can weigh dealing with a certain amount of present anger when the change arises - much of which is staged for your benefit and isn’t all real - or dealing with real anger when your contracting party is presented with a bill later on which it didn’t expect (or expect to this extent). As they teach at the lobotomy school most of our employees have gone to, ‘this is a no-brainer’! One of the most valuable lessons you can ever learn in the contracting business is that you simply can’t write too many letters. You can always back down from a letter that annoys someone or withdraw a letter. You can’t, however, put a letter in the file after the fact which wasn’t there in the first instance unless you are willing to take the chance of living for years on end in a room that measures six by nine feet and you really like chicken fried steak on Thursdays and you don’t mind trying to sleep at night with all the lights on and you don’t mind having some friends try to really get to know you. Put another way, false statements in court can be perjury and a conviction for perjury earns one the right to enjoy many of the things indicated in the last sentence.

Of course, the third reason for not giving notice letters is that the contractor in question simply didn’t read his/her contract and didn’t know to do so. As we were taught not to say something unless it was nice (or productive), this paragraph ends right . . . . .now.

Recognizing that no contractor is perfect, however, here are some ideas:

1. Try to prove that giving notice would be (would have been) futile. A failure to comply with notice provisions is not fatal when giving the notice would only be an empty exercise. In other words, if you can convince a court that even if you had given some notice the result wouldn’t have been any different, then your failure to not give notice in any particular case may be excused. So held the Appeals Court in the case of D. Federico Company, Inc. v. New Bedford Redevelopment Authority, 9 Mass. App. Ct. 141 (1980). As stated by the Court on pages 143-144 of the decision:

“Thus, the dispute concerning payment of line item 36 did not mature until the job was finished, and the NBRA had made it abundantly clear that it was going to resist paying for traffic protection and maintenance. . . . At that point, it was an exercise in futility by the plaintiff to file notice of a dispute with the NBRA. “Although performance of a particular act by one party is contractually specified to be precedent to the arising of any obligation in another, the prior act need not be performed where it would be a hollow gesture sure to be disregarded by the other party.” Trustees of Boston & Maine Corp. v. Massachusetts Bay Transp. Authy., 367 Mass. 57, 61-62, 323 N.E. 2d 870, 873 n.3 (1975) and cases cited. See by analogy Pupecki v. James Madison Corp., 382 N.E.2d 1030 (1978), which states the familiar rule that although, in order to maintain a derivative suit, a shareholder must make a demand on the directors that they cause the corporation to file the action, the requirement does not apply if it appears that demand would be futile.”

This case was cited with approval or recognition of this principle in Sutton Corporation

v. Metropolitan District Commission, 38 Mass.App.Ct. 764, 652 N.E.2d 627 (1995).

In the case of Cheschi v. Boston Edison Company, 39 Mass. App. Ct. 133, 142, 654 N.E.2d 48 (1995), the Appeals Court considered the issue of whether or not the failure to give notice as a condition precedent can be excused:

“ "A condition precedent defines an event which must occur before a contract becomes effective or before an obligation to perform arises under the contract [citations omitted]. If the condition is not fulfilled, the contract, or the obligations attached to the condition, may not be enforced. See generally 5 S . Williston, Contracts S 663 (3d ed. 1961 & Supp.1990); Restatement (Second) of Contracts S 225 (1981)." Id. at 45, 577 N.E.2d 283.. . . A party may be excused from complying with a condition precedent if it has proven that performance of the condition would be futile: "The law does not require useless acts." Fortune v. National Cash Register Co., 373 Mass. 96, 107-108, 364 N.E.2d 1251 (1977), and cases cited. See also D. Federico Co. v. New Bedford Redev. Authy., 9 Mass.App.Ct. 141, 143-144, 399 N.E.2d 1103 (1980).” (Emphasis added)

Fortune, supra, on page 107 cites a wide variety of cases supporting this provision: “See Leigh v. Rule, 331 Mass. 664, 668, 121 N.E.2d 854 (1954); Nevins v. Ward, 320 Mass. 70, 73, 67 N.E.2d 673 (1946); Schayer v. Commonwealth Loan Co., 163 Mass. 322, 324, 39 N.E. 1110 (1895); Restatement of Contracts s 306 Comment a (1932); 5 S. Williston, Contracts ss 676, 699 (3d ed. 1961). A refusal to pay a sum due under a contract excuses performance of a condition requiring notice. Jackson & Co. v. Great Am. Indem. Co., 282 Mass. 337, 342, 185 N.E. 359 (1933) (proof of loss to insurance company). United States v. Conti, 64 F.Supp. 187 (D.Mass.), aff'd 158 F.2d 581 (1st Cir. 1946) (notice of contract termination). Where an employer repudiates or nullifies procedures established by the contract, the employee is excused from performance of the conditions imposed on him. Balsavich v. Local 170, International Bhd. of Teamsters, --- Mass. ---, --- [FNe], 356 N.E.2d 1217 (1976). See Restatement of Contracts s 302 (1932); 3A A. Corbin, Contracts s 759 (1960).”

2. Try to prove that your contracting party waived the change order notice requirements. A claim for a changed condition might be possible when the notice provision has not been complied with when there is demonstrable waiver of that provision or of the contract provisions dealing with changed work or other notice provisions by someone authorized to waive that provision (i.e. a project manager rather than a superintendent). “Waiver” is defined as the ‘intentional relinquishment of a known legal right’. Thus, for example, if you could demonstrate a course of dealing or custom orusage for a particular job to be that various prior change order work was done with no paperwork which was subsequently recognized and paid for without complying with the ‘changes’ clause, this might justify a contractor in not providing prior notice and submitting appropriate paperwork for later change order requests of a similar nature. A big problem in this situation is that waiver will not ordinarily be found unless it can be attributed to one in a position of authority. For example, there is some case law in Massachusetts to suggest that a superintendent for a general contractor does not have inherent authority to even order change order work. Thus, the person who ‘waives’ the compliance had better be someone with contractual significance: an architect, a project manager, a corporate officer.

3. Try to get (at least) a Construction Change Directive before performing the work. A Construction Change Directive is a change order mechanism, largely found in the AIA documents, which allows there to be an issuance of a direction to perform work with an acknowledgment that this is a changed condition but without an advance agreement as to the price. Typically, this will issue under the following conditions: (a) the plans and specifications have changed, perhaps dramatically, and with the press of time constraints, there is insufficient time to price the work, particularly where the changes are being designed as the project proceeds and it is not clearly understood at the go-in exactly what units of labor and material are likely to be required; (b) there is no dispute that there is a‘changed condition’ but the owner or general contractor is unwilling or unable or both to take the time and price it.

The advantage of getting this is, at least, you have an acknowledgment on the part of your contracting party that there is or has been a changed condition. In trying to prove any civil case, a plaintiff needs to prove that it is entitled to recover (liability) and what the amount of the recoverable damages are (damages). Having a construction change directive is a help in establishing (at least) that there is liability for the changed condition, as opposed to having to deal with the issue down the road that the claimed ‘changed work’ is nothing other than contractually-required work or is otherwise non-compensable.

War stories on this one, however. One of our best general contractors helped a public authority out with a serious problem. This company had the obligation of building an emergency building and police station addition for a municipality, which required building locker rooms and other usable facilities in the basement. Once construction started, it was discovered that the basement would be under water because of a high water table. By various letters between the parties - and by the issuance of a construction change directive - it was agreed to take this space out of the basement and install these rooms in the attic, which was going to be for future expansion only. Of course, when the architect drew the attic, he changed the slope of the roof, added dormers, expensive windows - you know the tune. The contractor went ahead and did this work - which had a fair market value of somewhere between forty-five and ninety thousand dollars - only to have the owner contend once the job was successfully concluded that because of the deletion of the work in the basement - which would have to be given as a credit to the owner - the value of the new work was only three thousand dollars. An arbitrator saw this the contractor’s way but only after several expensive days of trial and legal proceedings.

4. Try to obtain some other acknowledgment that the work in question is a changed condition. This is only common sense. If we can not get an agreement on both liability and damages - which would be reflected by a change order, in the ordinary course - at least get something in writing. Even a letter from your contracting party acknowledging that the condition in question is not contractual work but change order work is better - sometimes a lot better - than nothing. Statements by a party to a case are deemed as ‘admissions’ later on in litigation between the parties, which is tantamount to proving the point in court.

5. If you have been ordered to do extra or change order work orally – and you can’t get any change order or other paper – send a fax to your contracting party before doing the work. Remember, that the dance between the subcontractor and the general contractor – and the one between the general contractor and owner – is an eternal, highly-scripted dance. Namely, the party who gives you the contract which says that you can’t do change order work without a signed change order before doing the work will also be the party who will try to get you to do the change order work without having anything in writing and then throw this in your face at the appropriate time, which would be – from their perspective - after the work is done and you then discover you’ve got bupkes for paperwork.

An example. You are ordered to put an extra few windows in a building by the superintendent for the general. Nothing in writing. Before doing the work, send the project manager a letter to the following effect: that you have been directed by the superintendent to do the work; that it is extra work; and, that you will bill for the windows at the contract rate - or at a fair and reasonable price - and that you will proceed with the work in three days unless you tell me not to do so in writing. The law requires parties in certain circumstances to take action or to suffer the consequences of remaining silent. If you send such a letter by fax - make sure that you have one of those machines which prints a transmittal report on the first page of the fax, like many of the HP machines - and give the project manager a reasonable time to respond to this, you have something down the road in the nature of an implicit authorization to do the work under the specified circumstances. Note: give your recipient a reasonable amount of time within which to receive and respond to your letter. Sending such a fax on the morning you start the work is not likely to do you much good, as a court wouldn’t consider this as having been ‘reasonable’ in that it didn’t afford the other side a reasonable amount of time within which to object or respond.

6.If you are ordered to do some work which you don’t consider to be contract work, send them a letter back that this is being done ‘under protest’ and that you reserve your rights to seek extra compensation for this changed condition. Again, if you are ordered to do work and don’t object to doing so prior to doing the work, an inference can and may be taken that you didn’t object to the work because you realized that it is contract work. Not a good idea, if that is not the case. Remember, when you are dealing with a changed condition, you had better think of the issue of ‘notice’ within the same sentence (or breath). If you tell someone that you are doing this under protest, the other side will have less ability to claim that: “Gee, we didn’t know that you considered that to be an extra. Had we known, we might have been able to work something out.”

7.In certain circumstances, refuse to the changed work without a change order. Life becomes very ‘nail-biting’ in these types of circumstances because, under some circumstances, a refusal to do change order work consistent with the scope and amount of your existing contract may constitute a grounds for your termination. Unless you fairly well understand your situation, getting legal advice as to any particular circumstance prior to its becoming a done deal may be money well-spent. There are no absolutes in these situations. A lot will depend on the wording of your contract and some may depend on the prior course of dealing between you and your contracting party on this and other contracts. Recognizing that there are no absolutes, there are, at least, a couple of ideas. The greater the percentage is of your contract as is reflected by the proposed change order, the greater the justification is to refuse to do the work without something in writing. Conversely, the smaller the percentage is of the proposed change as compared with the amount of your contract, the less justification there might be for such a refusal.

Example. You have a three hundred thousand dollar plumbing contract to put in one hundred fifty lavatories, which contract is a lump sum contract and not a unit price contract. You are ordered to put in another fifteen lavatories using the same plans and specifications. There might be less justification in refusing to do the work in these circumstances than you would have if another one hundred bathrooms were attempted to be added. Since that would almost amount to a new contract, the work is so dissimilar to what might be reasonably expected as a change to justify refusing to do it without having the change order in writing first.

Parenthetically, there is some law pertaining to pure unit price contracts that an ordering of increased units may not require an actual change order where the contract contemplates some variation in quantities.

If none of the above helps, seek legal advice before a situation becomes irrevocable, set in stone. This is a difficult issue and it seems foolish to guess when there is a lot of money at stake. While lawyers are not miracle workers, in some instances they can be helpful in resolving these types of situations or at least in minimizing the potential damage and maximizing your potential for recovery down the road. Can you level concrete after it is has completely dried? Of course not! And your lawyer can only argue your case with the facts that you have given him/her. Let him/her help you develop better facts while the situation is still fluid.

Conclusion

Remember that often - perhaps, usually - having a superintendent sign slips for labor and material performed on a given day may have little or no contractual significance as to extra work. For, those signed slips are nothing but acknowledgments by your contracting party that certain units of labor and material were expended at a certain job on a certain day. This is not, however, acknowledgment that the expended labor and material was the result of a changed condition unless you have paperwork, in advance, saying that this will be the meaning of such signed slips . In other words, the acknowledgments in writing that labor and material were expended is not an acknowledgment that they constitute a changed condition for which additional compensation is warranted. Therefore, they may have no real significance as admissions by your contracting party other than as to a possible agreement as to what units of labor and material were expended.

Read your contracts. Do what they require. Use good common sense. Get help when you need it before incurring costs and expenses that you may not be able to pass on.

Repeat after me in a low, reverent tone: I love to write letters! I live to write letters! Writing letters is good! Writing letters is my life. Staring at a computer is fun! I can hardly wait until there are new versions for Word and WordPerfect!

When all else fails, remember prayers to St. Jude Thaddeus and Rita of Cascia. In these uncertain and difficult times for the Catholic Church, they can probably use the business and might especially appreciate the attention. And, it’s a proven fact that saying prayers lowers your stress level and blood pressure!

(This paper and presentation is intended for educational purposes and should not be considered as specific legal advice for specific situations facing you. This subject matter is complicated and cannot be presented with any ultimate degree of accuracy and finality in a one-half day session to non-lawyers. For teaching purposes, some cases and trends have been generalized; indeed, architect/engineer liability to contractors is in itself an emerging and developing trend. The fact that some cases have been recited does not mean that there are not other cases which have held differently. Really, the purpose of this article is not to provide an exceptionally accurate ‘snapshot’ of Massachusetts law at present. Rather, the purpose of the seminar has been to identify what the issues are in these types of claims and what the key concepts are in working one’s way through them.)