Most construction contracts, including those based on the American Institute of Architects (“AIA”) forms, contain terms requiring that any change orders be in writing and signed. Tennessee courts have, with some frequency, not enforced those provisions. Usually, the legal theory used by those courts is waiver.
Two Tennessee construction cases involving construction contracts with change order requirements, and in which the courts reached different outcomes, provide a good view of the legal landscape in which a contractor which has not strictly complied with a written change order provision will find itself. The first case is Moore Construction Company, Inc. v. Clarksville Department of Electricity (Tenn. Ct. App. 1985). Here are the key facts in that case:
- The project was for the construction of a new office building
- The owner contracted with two prime contractors, Moore and Kennon
- Moore was to perform the site work and other exterior work
- Kennon was to construct the building
- All parties understood that Moore would be able to complete only part of its work before Kennon finished constructing the building, and that, it would not be able to complete its work until Kennon had finished constructing the building
- Moore completed its initial work timely
- Once Kennon started, it fell behind schedule due to its subcontractors
- In September of 1981, Moore began to complain that it could not complete its work due to the delays by Kennon
- A meeting was held among the owner, Moore and Kennon at which meeting it was agreed that the parties would have to adjust their schedules
- No written change order was prepared after this meeting, but the owner prepared a job site memo stating that the parties had agreed to extend the time for Moore to complete its work
- When Moore went back to work, the owner directed it to perform extra work and it did
- The extra work was done without a change order and the owner ultimately paid Moore for that extra work without protest
- Moore requested that the owner pay it an additional $22,000 in delay damages above the contract price which resulted to Moore from the delays caused by Kennon
The owner refused to pay Moore the delay damages. It argued that it had no obligation to do so because it had not signed a change order for an increased contract price. The construction contract in the Moore case incorporated the AIA General Conditions which provided: “If the Contractor wishes to make a claim for an increase in the Contract Sum, he shall give the Architect written notice thereof within twenty days after the occurrence of the event giving rise to such claim.” Article 12.1 of the General Conditions also required that the contractor obtain a written change order to enlarge the scope of work.