How Change Orders Can Lead to Construction Disputes

Change orders are a common occurrence in construction projects. They may happen due to unforeseen site conditions, design modifications, or client requests. In all cases, they serve as formal amendments to the original construction contract and may adjust the scope, cost, and/or timeline of a project. Incidentally, change orders frequently become a source of contention and construction disputes in Houston.

Common Causes of Disputes Stemming from Change Orders

A change order typically includes a description of the change and adjustments to the project cost and schedule (as well as authorization from the relevant parties). This process is designed to ensure transparency and agreement before additional work begins. 

Change orders are governed by the underlying contract and applicable state law. The risk frequency of change order disputes can also depend on the project’s delivery method, as design-build and design-bid-build structures allocate design responsibility and scope control differently.

These orders can generate legal and operational challenges due to: 

Lack of Clear Documentation

In some cases, parties may fail to properly document the change. If the scope of the change is not clearly defined or if changes to the cost and schedule are unclear, disagreements may occur. For example, suppose a contractor may proceed with additional work based on a verbal directive. The owner may later dispute the scope or necessity of the work.

Unauthorized Work

Change orders can generate issues if a contractor performs work without prior written approval. The owner may claim the contractor acted outside the scope of the agreement, while the contractor argues the work was necessary to complete the project in a timely manner.

In some cases, these disputes arise when unexpected construction defects are discovered during the project, requiring repairs or design changes. Courts typically require written authorization for change orders, and failure to obtain it can invalidate the contractor’s claim for additional compensation.

Disagreements Over Scope

Change orders aren’t always clear on what constitutes a “change” versus what falls under the original contract scope. This lack of clarity can spark disputes over whether additional compensation or time is part of the scope of a project. 

Delay and Disruption Claims

A change order that adds work or alters the sequence of construction can result in project delays and increased overhead. Contractors may file claims for extended general conditions or lost productivity. Owners, in turn, may dispute these costs, particularly if they believe the contractor should have mitigated the delay. These delays can also trigger liquidated damages provisions, leading to additional legal and financial disputes between contractors and owners.

Multiple Change Orders

A single change order might not disrupt a project. However, the compounding effect of multiple changes can significantly affect cost and schedule. Contractors may argue that change orders disrupted the overall project plan. These claims are difficult to prove and often require expert testimony.

How to Protect Yourself from Change Order Disputes

The best way to handle a change order dispute is to prevent it. Most conflicts trace back to gaps in the process. A few disciplined actions can reduce the risk of dispute:

• Put every change in writing. An order describing the work, the added cost, and any schedule impact protects both sides.
• Get authorization before the work starts. Confirm who has the authority to approve changes, and secure that approval before proceeding. Work performed without it may not be compensable.
• Assess how extensions affect cost. Define any extension to the schedule and any extended overhead, so delay claims do not surface later.
• Follow the contract’s change order clause exactly. Most contracts set out a specific notice and approval procedure. Skipping a step can forfeit a valid claim.
• Keep contemporaneous records. Maintain daily logs, photos, emails, and signed field tickets to strengthen your claim should disputes arise.

For owners, insisting on this change order process prevents surprise invoices. For contractors, it can mean the difference between getting paid for extra work and absorbing the cost. 

How Change Order Disputes Are Resolved in Texas

When a change order dispute cannot be worked out on the project, Texas offers several paths to resolution. The route usually depends on what the contract requires.

• Negotiation. Most disputes are resolved directly between the parties, often by exchanging documentation that supports or rebuts the disputed work. This method can be done informally by the parties, or through their attorneys.
• Mediation. Many Texas construction contracts require mediation before any lawsuit. A neutral mediator can help the parties reach a voluntary settlement regarding the project. Texas courts may order mediation even when the contract does not.
• Arbitration. If the contract contains an arbitration clause, the dispute will be decided by an arbitrator instead of a court. Arbitration is often faster and more private, but the decision is binding and difficult to appeal. Additionally, arbitration terms and procedures may favor the party that drafted the contract.
• Litigation. When other methods fail to achieve a resolution, the dispute may proceed to court. In these instances, an aggrieved party may sue for breach of contract, for the reasonable value of extra work performed, or to enforce the contract’s terms.

The resolutions of these disputes come with significant remedies for the injured party. For example, a contractor may recover payment for unpaid change order work, while an owner may recover for defective or unauthorized work and related delay costs. 

Deadlines That Can Affect a Change Order Claim

In Texas, a breach of contract action generally must be filed within four years of the breach. Separate and shorter deadlines apply to mechanic’s lien rights under Chapter 53 of the Property Code and to prompt payment demands.

A party that waits too long to seek these remedies may lose their right to legal action through the courts. An experienced attorney can help you understand the deadlines that apply to your claims and help you avoid losing out on compensation due to a technicality.

Contact a Houston Construction Dispute Lawyer for Help Understanding Your Options

Change orders are a standard part of the construction process. However, they can easily lead to costly and time-consuming disputes. If you are facing unexpected costs or other issues based on an unclear change order, you have rights. 

A party challenging a change order may have a claim for breach of contract or seek compensation for extra work performed without proper payment. If the change order process wasn’t followed (such as failure to provide written approval or misrepresenting the scope), you have the right to enforce the contract terms and seek damages.

At Porter Law Firm, our Houston construction dispute lawyer can help you understand your rights and legal options. Contact us today to schedule a confidential consultation.