During any construction project, whether a simple residential project or a complex commercial one, there are often changes to the scope of work which differ from that originally set forth within the architectural plans. These changes to the plans, whether they increase the cost or reduce the costs of the project are called Change Orders. Virtually every Construction Contract has clauses which address the proper way to document Change Orders for both the benefit of the Contractor as well as the project owner. Problems typically arise in the performance of Contracts when either one or both of the parties fail to properly document change orders. As a General Contractor or Sub-Contractor, it is crucial that you carefully and fastidiously follow the format as to what is required under the Construction Agreement for change orders. Virtually every Construction Agreement requires that Change Orders be in writing and that they be signed by all parties prior to the performance of any additional work. This is particularly important in the renovation of existing residences, as the New Jersey Consumer Fraud Act can expose a Contractor or Sub-Contractor to great harm should the change order not be properly documented. The issue, however, is equally important in the context of a commercial project, as the Sub-Contractor or General Contractor may have a difficult time in obtaining payment from the project owner if the Change Order is not properly documented.
In these tight economic times, it is important that every Contractor or General Contractor maximize their profits on a project. One way to ensure this takes place is to properly prepare the Change Order requests in accordance with the Contract and to submit them for the owner’s approval prior to performing work. This also gives all parties a fair opportunity to discuss any additional work prior to performance. As such it is suggested that a Contractor or Sub-Contractor develop an internal form that it utilizes on every project with regard to Change Orders.
Provided the form is properly drafted, it should suffice with regard to any contractual relationship; however, some slight modifications may be necessary under certain circumstances. Although time is money, it is important that the Sub-Contractor or General Contractor take the necessary additional time to secure the owner’s written approval prior to performing any additional work. This short period of inactivity will ensure full payment at the end of a project without any dispute as to the work that was performed. Clearly, the last thing a Contractor needs is a dispute with regard to costly extras.
Should a Contractor have questions with regard to the proper format of a Change Order and should a Contractor need help in litigating the validity of a Change Order, it is strongly suggested that they consult with an attorney. Stark & Stark has attorneys with experience in this precise area of law.