Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

Many construction cases that end up in court or arbitration do so because contractors are unable to prove each of the elements of its claim. Additionally, the value of many out-of-court settlements is also reduced because the contractor is unable to prove each of the elements of this claim. 

One of the more litigated issues on a construction project is about changes to the work.  Changes, alterations and extra work claims typically involve construction changes where the owner refuses to acknowledge that the work has changed.  The best explanation of changes that I have read came from a government contracts case in the Federal Circuit: 

A constructive change occurs where a contractor performs work beyond the contract requirements, without a formal order under the changes clause, either due to an informal order from, or through the fault of, the government. Before it can recover, the contractor must show that the government ordered it to perform the additional work. The contractor cannot merely show that the government disapproved a mode of performance. Rather, the contractor must show that the government actually compelled the additional work. The government order need not be formal or in writing. The additional work must be beyond the requirements of the pertinent specifications or drawings. At the same time, the additional work performed by the contractor cannot be beyond the general scope of the contract. Drastic modifications or fundamental alterations ordered by the government beyond the scope of the contract will constitute a breach of contract. The additional work must therefore be beyond the requirements of the contract, albeit still within the general scope of the contract. NavCom Defense Electronics, Inc. v. England, 53 Fed.Appx. 897 (Fed.Cir. 2002).

In order to prove a constructive change or extra work claim, here is what you should do:

1. Review your contract.  There should be a "Changes", "Alterations", or "Extra Work"  clause. Generally, the clause permits the owner to order the change in the work that has been requested.
2. Confirm change in writing.  If the changes clause requires the contractor to have a written change order prior to commencing work, then you should make sure written approval has been given.  You would be surprised at the number of disputes arising from supposedly "approved changes" that were never formally approved or reduced to a writing.
3. Track your notice provisions.  Again, the contract contains the notice provisions regarding changes and the contractor will be required to prove that it complied with those notice requirements.
4. Prepare for both entitlement and quantum.  The contractor will be required to show that the work was, in fact, additional work required by the owner.  A written change order will go a long way to establishing this claim, but the contractor also has to be prepared for the case when the change is disputed by the owner.  The contractor should keep track of the extra costs it is claiming for proof at mediation or trial or arbitration.

What other tips can you share when dealing with a changes claim?

Image: David Reece

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A fellow Twitter friend, @danielschwartz, promoted a technology symposium on his Connecticut Employment Law Blog yesterday.  In order to spread the word about the symposium, he challenged his readers and fellow Twitter followers to tweet about their favorite Supreme Court case in less than 140 characters.  

As I thought about the construction industry, there was only one decision that kept coming to mind.  It involved a contractor who agreed to build a dry-dock in the Brooklyn Navy Yard.  In order to build the dry-dock in the site selected for it, the contractor was required to relocate a portion of a sewer that ran through the specified site. The owner (the United States) provided the plans and specifications for the sewer that was to be relocated.  The contractor completed the work according to the plans and specifications.  The owner approved and accepted the work.  But wait ... about a year after the relocation of the sewer, a dam in a connecting sewer caused flooding in the area excavated for the dry-dock. This dam was not shown on the owner's plans and specifications.  That's the background and here is my tweet: 

US v. Spearin: Owner designs. Contractor builds. Owner accepts. Work sucks. Owner sues. Contractor absolved. Owner loses.

If you live in the government contracting world, don't start sending me emails about how wrong I have described the Spearin Doctrine above.  Let me expand my statement beyond 140 characters and give you some more information about the 1918 decision in United States v. Spearin:

• The Rule. The Spearin Doctrine is legal principle that holds that when a contractor follows the plans and specifications furnished by the owner, and those plans and specifications turn out to be defective or insufficient, the contractor is not liable to the owner for any loss or damage resulting from the defective plans and specifications.
• Exceptions to the Rule.  In 2007, the Ohio Supreme Court rocked the construction law world by significantly limiting the application of the Spearin Doctrine.  In Dugan & Meyers Construction Co. v. Ohio Dept. of Administrative Services, the trial court applied the Spearin rule in favor of the contractor based upon alleged damages from the impact of an excessive amount of design changes.  On appeal, the Ohio Supreme Court reversed, holding that the Spearin Doctrine did not apply to cases involving delays due to design changes. Rather, the court focused its decision on the “no damages for delay” and “written requests for time extension” clauses in the contract.  Specifically, the court concluded: “We observed that the Spearin Doctrine does not invalidate an express contractual provision.” 
• Applicability to Green Construction.  Last year, fellow blogger Chris Cheatham suggested that there could be a green Spearin Doctrine.  I am confident that the Spearin Doctrine would be applied equally to non-green construction projects and LEED certified projects, As noted by Chris, a guarantee by the contractor could invalidate any Spearin Doctrine defense by the contractor.  Sounds like the Ohio Supreme Court, right?  The Spearin Doctrine cannot invalidate an express contractual provision.

Any Spearin tid-bits that you would like to share? 

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