No Written Change Order? No Problem! Court Sides with Subcontractor in Payment Dispute

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Many contracts contain provisions requiring that changes to a contract be in writing and signed by a particular authorized person. Under such provisions, work done without proper written authorization will not be reimbursed. So, what happens when, in the rush to get the job done, work is done without prior written authorization? 

In Patriot Construction v. VK Electrical Services, the court ruled the subcontractor should get paid anyway. In that case, the subcontractor performed extra work at the oral direction of the general contractor’s project manager. There was no signed written directive, and the project manager was not the person identified in the contract as authorized to approve changes to the work. Nevertheless, the trial court held that the project manager had apparent authority to waive those requirements and had done so through his actions. The appellate court agreed, recognizing that “[p]arties to a contract may waive the requirements of the contract by subsequent oral agreement or conduct, notwithstanding any provision in the contract that modifications must be in writing.” In Patriot Construction, the project manager had negotiated the terms of the subcontract and was the subcontractor’s sole point of contact regarding the day-to-day work on site. The project manager had instructed the subcontract to perform extra work on several occasions, had told the subcontractor that it would be paid, and had never suggested that written authorization was a condition precedent to payment. Even though the project manager did not have actual authority to modify the contract, he had apparent authority, and that was enough. Under the circumstances, the subcontractor was due to be paid notwithstanding its failure to adhere strictly to the requirements in the contract.

Patriot Construction is a good reminder for contractors and subcontractors alike that you should follow the contract in the first instance, but that all may not be lost even if you don’t. Depending upon the applicable state law and the particular facts in your case, strict contract requirements may be deemed to have been modified.