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Generally, changes fall into one of three types:

Change Orders

Construction Change Directives

Minor Changes

Change Orders
"Change Order" is a just a technical term for an amendment to a construction contract. When
you hear Change Order, think contract amendment. Why? Because a Change Order is a
bilateral agreement between parties to the contract an owner and prime contractor, prime
contractor and subcontractor, two or more subcontractors to change the contract. A Change
Order represents the mutual consensus between the parties on a change to the work, the price,
the schedule, or some other term of the contract. And, because it represents a mutual
consensus, a Change Order is usually the best, and least controversial, way to make changes.
Like any other contract amendment, a Change Order must satisfy each requirement of original
contact formation: offer, acceptance, reasonable identification of changed terms, and exchange
of consideration. Each partys signature on a Change Order satisfies the offer and the
acceptance requirements.

Identifying Changes
Take extra care in identifying the changes your Change Order will make. Refer back to the parts
of the original contract, and any earlier amendments or Change Orders, that you are changing or
that your new changes may affect. You may need to inventory and audit the original contract and
previous amendments to do that. And if you are changing the work, refer in your Change Order
to the news design documents that reflect how the work is changing. Better yet, attach the new
design documents as exhibits to your Change Order.

Change Order Consideration


Consideration can be tricky. Each side must either (a) promise to do something theyre not
already legally obligated to do (including getting some third party to do or not do something), or
(b) promise to not do something that theyre otherwise legally free to do. A Change Order where
one side makes these kinds of promises, but the other doesnt, is suspect and may be
unenforceable.
A classic example: a foundation subcontractor approaches their prime contractor and says that
they (the subcontractor) need to increase the price five percent. Because they dont want to lose
time (and perhaps money too) trying to get a substitute foundation subcontractor, the prime
contractor reluctantly says "OK." They enter into a Change Order increasing the subcontract

price by five percent. But there is no other change. The subcontractor doesnt promise to
provide additional work or different material. They dont promise to complete the foundation
work any earlier. Instead, the Change Order merely obligates the prime contractor to pay an
extra five percent for the same foundation work promised in the original subcontract.
That Change Order may be unenforceable because consideration from the subcontractor is
missing; the subcontractor is getting something an extra five percent for nothing. Luckily,
there are some simple ways to ensure that a Change Order includes an exchange of
consideration and avoids this problem.

Change Order Confusion Who Issues Change Orders


Theres a lot of confusion surrounding Change Orders. One brand concerns who may issue a
Change Order. The answer: no one can issue a Change Order.
A Change Order is a bilateral amendment to a construction contract. Each party to the contract
must agree to the Change Order, usually by signing it. No one can unilaterally issue or impose a
Change Order. Not the owner, not the contractor, not a subcontractor, and not the architect or
any other designer. Anyone may propose a Change Order. But thats just a proposal (or, if
youre a lawyer getting technical, its an offer to amend the contract). But a Change Order
is something you and the other side must both agree to; neither can issue one unilaterally .
Where does the confusion come from? Perhaps its the AIA contract documents? The widely
used A201 General Conditions of Construction Contract refer to Change Orders in
ways that suggest they are something other than a specialty contract amendment.
They mention Change Orders beingissued, suggesting that the owner, the contractor, or perhaps
even the architect may unilaterally impose one. They cant. But this language has circulated for
decades, fostering a trade myth, or at least a cherished superstition, that someone can issue a
Change Order all by themselves.

This confusion isnt just semantics. It has real consequences. More than once Ive observed
disputes where one side resolutely contends that their contract was amended by a Change Order
theyd issued. They relentlessly insist, usually in vain, that the price was increased, or a
completion deadline postponed. The result: they merely proposed a Change Order without
agreement from their counterparty. Neither the price, nor the deadline, was changed.
Nevertheless both sides spend precious resources on the dispute (including money on
professionals fees that come along with disputes). Thats money they instead could have reinvested in operations, used to pay down debt, paid in bonuses to personnel, or dividended to
owners.
Remember: if you want a Change Order, you cant get one by yourself.

Other Parties Signing Change Orders Guarantors and


Sureties

In addition to the parties to the contract itself, you may need to get other people to sign a Change
Order, or at least sign something else granting their approval of, or consent to, a Change Order.
Generally, if someone has guaranteed one of the contracting parties performance under the
contract, youll need to have the guarantor sign on to, or consent to, the Change Order so their
guaranty applies to the change too. In some circumstances, amending a contract without a
guarantors consent can release the guaranty, something youll usually want to avoid. The same
goes for sureties who guaranty contractual performance under a performance bond or a
payment bond.

Conclusions on Change Orders


Change Orders are necessary and very useful. But remember:

Specifically identify what your Change Order is changing, especially changes


to the work, the price, and deadlines for completion

Get each party to the contract (the original parties, plus any others whove
joined under previous amendments) to sign. Moreover, if there are others who
have obligations affected by the contract youre changing (e.g., guarantors,
sureties), you should probably get their approval or consent too