Constructive Changes deal with the right of a contractor or subcontractor to collect damages caused by an informal change to a contract, even if not expressly written in the 'Changes' clause of the contract.
Construction changes are not a new topic or subject of discussion. Generally, if a party to a construction contract wants to make changes to the original, agreed-upon design, timing, and materials of a written agreement, the contractor can issue a change order. The change order, when signed, becomes a legally binding appendage to the original agreement. Much less well-known is the concept of constructive changes.
Constructive Change law allows for non-written, verbal agreements to be enforced, as long as one of the parties acts (or does not act) in good faith on a verbal agreement that amounts to an order or directive to the agreement. Under current laws, these kinds of agreements, whether written or not, constitute a change order, and are treated the same as written change orders. Constructive change theory has been well accepted in federal courts and in most jurisdictions, and is generally applicable in standard and custom construction contracts.
Constructive changes generally appear in the following ways:
- Contract interpretation
- Material or Procedural Substitution
- Defective specifications
Contract Interpretation. If the contracting officer (the individual for whom the work is being performed) misinterprets the scope of work and requires extra work, the change can be considered a constructive change order. Additionally, if an inspector requires the contractor to use higher-quality materials or change the specifications that cause additional cost to the contractor, the contractor can collect additional wages and expenses for the change. In this case, the Inspector is authorized to represent the individual for whom the work is performed. An example of this might be an inspector requiring a contractor to change the grade of a road, which requirement increases the time and materials required to complete the project.
One important note about this kind of change order: the law does not apply to a contractor's misinterpretation of the contract.
Material or Procedural Substitution. If an inspector substitutes materials or procedures normally used by the contractor in performing the scope of work, the inspector acts as the agent for the individual, and the additional materials and work are compensable by the contractor.
Defective Specifications. In all agreements, there is an implied warranty that if the inspector's specifications are followed, the item meets the contract requirements. Specifications can be defective in simple error, inadequate detail, or impossibility of performance. In cases where the inspector's specifications are defective, the change would be considered a constructive change.
In order to avoid constructive changes, the local government should educate its employees (inspectors) regarding best materials, specifications, and procedures. Likewise, a wise contractor would make sure to confirm directions from inspectors.
If you have questions about Constructive Change law in Utah, we can help. We have worked with construction claims for more than 15 years and have received favorable results for our clients on both local and appellate court levels. In all cases of construction contracts, we recommend speaking with your attorney and clearly understanding all implications of the contract before signing.