Change Orders and Extras Legal Issues
Changes occur on almost every construction contract for a variety of reasons, including aesthetics, cost, and lack of details—or errors— in the original plan.
Change orders often give clients a headache. Is it really a change order? Are these really extras?
Is all this work really within the scope of my original contract?
To ease your fears, know that, regardless of whether the changes are change order or extras, you do have the right to payment. Below are some helpful tips to consider when negotiating a construction contract.
The most helpful thing you can do when faced with problems regarding a change order is to contact an experienced construction law attorney. One can be had more cheaply than you think, and can save you, or make you, thousands of dollars at the end of your part of the project.
Because of the frequency of changes to construction projects, most contracts include a change order clause. Under these clauses, the owner reserves the right to request alterations or additions to the plan so long as they agree to compensate the contractor for their additional work. If you are presented with a change order clause that does not mention compensation, be weary of the effects it could have.
Each change order clause should contain information relating to the procedure by which a change order is requested, how compensation for the change is determined, and when that compensation is payable.
It should also include restrictions on the type, size, and timing of the change order so that the owner cannot change the whole nature of the project via this procedure.
The contract should also require that all change orders be requested in writing to reduce future disputes.
Another important aspect to note is that change order requests must fall within the general scope of the work you have been contracted to do. If change of order requests falls outside that scope it becomes a contract if both parties agree to it.
Although change orders are generally written orders signed by the owner, Illinois has carved out an exception to protect contractors that execute the change order without written knowledge.
Additionally, ensure that the individual ordering the change has the authority under the contract to do so.
Change Orders while working for the Government
The Illinois Public Works Change Order Act governs some change orders made by local governments and school districts within the state. It requires that any change orders that are more than 50 percent of the original bid price must be rebid.
It applies to contracts that:
Were entered into by a local government or school district.
Authorize or require an increase in the contract price equal to or exceeding 50%.
And are not governed by the Illinois Procurement Code.
Also note that the Illinois Procurement Code, which governs state construction contracts, requires that any change order that causes the contract price to rise above a certain threshold must receive permission from the state agency that authorized the bid.
Extra work is that work outside the scope of the contract. It can be thought of as a change order that is not a change order. Extras will support a claim by the contractor for additional compensation, additional time to complete the work, or both.
Illinois courts have established a test that separates extras from work that must be completed under the contract. The contractor must establish all of the following:
- The work was outside the scope of the contract.
- The extras were requested by the owner.
- The owner agreed to pay extra, by words or by conduct.
- The contractor did not voluntarily complete the extras.
- The contractor did not cause the necessity of the extras.
If the owner requests extras, be sure to ask for that request in writing. It is helpful if the written request includes statements regarding the five elements listed above.
Attorney Rob Cohen has decades of experience in Northern Illinois helping those contractors or subcontractors frustrated by change orders. He understands that you want to protect your right to payment without spending all of your profits on legal representation. Rob finds that, once you have hired an attorney, these disputes are often settled quickly. If you face a dispute over extras or a change order in Northern Illinois, contact him at 847.256.0800 for a free consultation.