While working as the Construction Claims Expert, Holloway Consulting has assisted many of our owner and contractors clients in the identification and preparation of, and the defense of, construction claims under both public and private sector contracts. This article continues our summary of Construction Claims involving Owner Caused Change claims:
OWNER-CAUSED CONSTRUCTION CHANGE CLAIMS
Written Notice Requirements
Ideally, change orders which will result in claims for additional compensation by contractors should be made by written order by an authorized officer of the owner and designated specifically as a change order. In most circumstances, the contractor is required to submit written notice of a claim within a specified number of days after receipt of the change order if he seeks an equitable adjustment as a result of the change order. Failure to do so may constitute a waiver of his claim rights under most circumstances if the owner can show prejudice as a result of the lack of notice. For example, AlA Document A201 requires that the contractor give written notice within twenty days after the occurrence of any event giving rise to a claim for an increase in the contract sum.
Many decisions uphold the requirement that the contractor notify the owner on a timely basis in order to recover for extra work. This notice requirement is a protection for the owner, because if he knows the work will be more costly, he has the opportunity to withdraw the order. Howard Riley Homes, Inc. v. Wenyel, 316 N.E.2d 185 (1974); Watson Lumber Co. v. Guennewig, 226 N.E.2d 770 (1967).
Notice requirements can be waived under certain circumstances such as by agreeing to pay. Williams Tilt-Up Contractors, Inc. v. Schmid, 52 Wash. 2d 429, 326 p.2d 41 (1958); Empire Foundation Corporation v. Town of Greece, 31 N.Y.S.2d 424 (Sup. Ct. 1941). Likewise, where the owners were on the jobsite almost daily and were fully aware that extras were being included as the work progressed, the written notice required by the contract was held to be waived. New Alm Building Center, Inc. v. Studtman, 225 N.W.2d 4 (Sup. Ct. Minn. 1974).
In summary, change orders may be issued under a contract if issued by a person having the proper authority and if within the scope of the changes clause. If change orders exceed the scope of the contract, and where the owner is in breach of the contract, the contractor may refuse to perform the work or may perform and sue for damages upon completion.
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