Contracts and subcontracts often contain language that requires change orders to be in writing and that no change order work shall be performed unless agreed to in advance in a signed change order. Oftentimes change order work is performed but the parties have not complied with the strict requirements of the contract by having this work signed off by the parties in a change order prior to the commencement of the work. Well, can such requirements be waived? If so, can such change orders form the basis of a Miller Act claim? The answer is generally yes provided the party arguing waiver can support the waiver with evidence (that the other party voluntarily relinquished the requirements through its course of conduct / actions).
This is exemplified in U.S. f/u/b/o Agate Steel, Inc. v. Jaynes Corp., Case No. 2:13-CV001907-APG-NJK (D. Nev. June 17, 2016), where a sub-subcontractor asserted a Miller Act payment bond claim for non-payment largely dealing with change order work that was never signed by the subcontractor that hired it. The subcontract stated:
No change orders or contract additions will be made unless agreed to in writing….If additional work is performed and not covered in this contract [sub-subcontractor] proceeds at [its] own risk and expense. No alterations, additions, or small changes can be made in the work or method of the performance, without the written change order signed by [subcontractor] and [sub-subcontractor].
The sub-subcontractor submitted change order requests and time and material summaries to the subcontractor that hired it. However, the subcontractor never signed the change orders or time and material summaries. The sub-subcontractor acknowledged that most of the requests for change order work was prompted by verbal authorizations, including written authorizations. Shortly thereafter, the subcontractor disputed the change order requests and claimed that the sub-subcontractor performed work without signed change orders. The prime contractor and its Miller Act payment bond surety disputed the sub-subcontractor’s payment bond claim contending the sub-subcontractor never complied with its subcontract by not obtaining prior written approval in a change order before performing the change order work.
Here, the trial court held that the subcontractor waived the subcontract’s requirement that change orders be in writing signed by both parties thereby allowing the sub-subcontractor to recover against the Miller Act payment bond:
Here, Agate [sub-subcontractor] has presented evidence that American Steel [subcontractor] waived the requirement that change orders be approved in a writing signed by both American Steel and Agate. Agate presented change orders and T&M summaries for payment. In his June 18 email, American Steel’s president, Williamson, approved a revised contract amount of $126,907.00. He also directed Agate to proceed with work as soon as possible and asked how soon Agate could return to the work site. Agate subsequently performed more work on the project based on the approval of the change orders. No issue of fact remains that the parties therefore waived the requirement that the change orders be in a writing signed by both parties.
Ideally this issue would never arise because the parties would comply with the strict requirements of the contract and change orders would never be performed without there being a signed change order. But we all know that this does not always happen leading to disputes relating to change orders after the work is already performed. While such strict language is certainly beneficial, it is not absolute and the party performing the change order work can navigate around the strict requirements by presenting evidence establishing this requirement was waived. Such evidence can be in the form of written authorizations to perform the work, the manner in which other change orders were handled, testimony from fact witnesses regarding oral authorizations, meeting minutes discussing the change, and other evidence that shows the party looking to enforce the requirements waived them through their course of conduct and actions.
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