3 Keys Ways To Avoid Litigation Over Change Orders
Few construction projects make it from beginning to end exactly as planned -- change orders are almost inevitable. Unfortunately, that usually means increased costs and delays in completion. It can also lead to conflicts with your customer that can lead to litigation.
If you're a contractor and you want to avoid ending up in court over a construction project and change orders, here are the best things you can do:
1. Put everything in writing.
Verbal change orders are an open invitation to conflict. While a lot of change orders happen "in the moment," you should always follow up on a verbal change order from a customer with an email or text message to document what is supposed to be changed, how it is supposed to be changed, and what issues you expect as a result. That way, there won't be any question about when a change order was requested (or who requested it) and whether or not it was approved.
2. Avoid time and materials agreements
Time and materials agreements, which function like an open-ended change order, are sometimes used in construction because they're convenient. They're also a nightmare when the relationship with a customer sours.
Essentially, these agreements allow you to charge for your time and the materials as the job develops. That may sound appealing at the beginning of a project to your customer -- but far less so when the costs start to accumulate and a project still isn't finished. Usually, the problem is that the customer doesn't have a concept of your base price -- which means that he or she doesn't really keep the expense of every change order in mind when he or she makes one.
Negotiating an agreed-upon fee for the initial contract avoids that problem. Then, when a change order is given, you can easily remind your customer that there will be additional costs.
3. Document changes as they occur.
Job logs and photographs are the best way to document the work that is done on a construction site as it progresses. You can make simple notes that include anything relevant to the construction being done, including weather conditions, the presence of subcontractors, the purchase of new materials, and unexpected problems. Notes and photographs can often provide answers to the most probing questions about increased delays and rising costs -- and soothe frustrations if a customer is unhappy with the lack of progress on a project.
Part of operating a successful construction business is learning how to avoid litigation. If you need more advice on how to handle problems with change orders, a construction attorney can help.
Contact professionals like Sauro & Bergstrom, PLLC for more information.