09/30/2020

Editor's Notes

One of the primary functions of a Changes clause in a construction contract is to enable the project owner to clarify, correct or alter the design documents. Yet furnishing incomplete or inaccurate drawings and specifications is considered a breach of contract by the owner. This leads to an interesting question: Does the owner’s prior breach waive or relinquish the owner’s contractual right to require signed, written change orders?

 

A Texas contractor recently prevailed in this argument. The contractor recovered the increased costs caused by design defects despite the absence of written change orders required under the terms of the contract. The jury had been instructed that if the project owner furnished incorrect or inadequate drawings and specifications, the owner relinquished its contractual procedural rights regarding change orders.

 

Unfortunately, the project owner failed to properly object to the jury instruction at trial, so the appellate court was unable to review its legality. The instruction stood. The ruling has no value as precedent on this issue, but it gives rise to an interesting discussion. For instance, if the Changes clause is intended to enable the owner to cure its breach by correcting defective design documents, should those defects waive the change order procedures established in the clause?

 

The other case in this issue involves responsibility for environmental mitigation costs. When the government represented that it had fully complied with one federal statute, but was silent on a second statute, the contractor was not expected to anticipate wetland mitigation fees arising out of the second statute.

 

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