Universal Builders (Plaintiff) contracted with Moon Motor Lodge (Defendant) to build a motel and restaurant, and the subcontractor failed to use the specified proportions of a reinforcing substance to be used in the building walls.
Construction contracts typically provide that the builder will not be paid extra for work unless it is done pursuant to a written change order, yet courts frequently hold that owners must pay for extra work done at their oral direction.
The contract provided that all change orders and requests for time extensions be made in writing and approved; and also provided for specified proportions of a reinforcing substance in the walls. The parties also entered a supplemental agreement that Universal would pay damages for the absence of reinforcing materials done by the subcontractor, perform other work at no additional cost, and pay liquidated damages for the delay in completion from April 1, 1962 to July 1, 1962. Universal substantially completed performance on September 1, 1962, and went into bankruptcy after filing this suit.
The bankruptcy trustee for Universal asked the court to declare the supplemental agreement void as allegedly induced by fraud, to grant a money decree for work done under both the primary and supplemental contract, and for lost profits and punitive damages. The Defendant denied any fraud, denied it owed money under the contracts and counterclaimed for the delay in completion.
The lower court awarded the Plaintiff $127,759.54 for the work done, plus extras and interest. The Defendant appealed.
Did the chancellor err in not enforcing the contract provision that extras would not be paid for unless done pursuant to a written, signed change order?
The Chancellor correctly held the Defendant liable to pay for the extras in spite of lack of written change orders.
The evidence showed that Defendant requested many changes, was informed that they involved additional costs, and promised to pay for them. Further, Defendant was frequently on the construction sight and saw the work being done without written approval.
The requirement that changes be made in writing was waived by the oral agreement between the parties to perform extra work, at an additional cost.