When Do Contract Changes Not Have to Be in Writing?

A decision in Aqua Pool Renovations Inc. v. Paradise Manor Community Club Inc. illustrates some of the circumstances in which inaction, silence, or implication can modify the terms of a written contract.

The case

In Aqua Pool, a contractor specializing in renovating swimming pools entered into a written contract with a country club to perform pool renovations. A representative of the country club's board of directors was appointed to sign the contract and oversee the work. According to the written contract, the renovations were to be completed by a certain date, and the contract provided that all change orders be in writing.

A dispute arose over payment of the contract sum when unanticipated problems with the pool renovation required additional work to be performed. The country club decided to withhold money because it believed the pool renovations were not timely completed. In response, the contractor brought suit against the country club to collect the contract sum as well as the costs associated with the additional work.

Both parties agreed that no written change orders were executed, but the contractor claimed that the additional work was authorized by the country club's representative. The country club claimed that because there were no written change orders, the additional work was not authorized.

The Court of Appeal of Louisiana examined the issue of whether the country club, through the actions of its representative, had in fact authorized the additional work.

The court's decision

The court first considered additional work the contractor performed in providing new piping and plumbing for the pool's intake manifold. Although the new piping and plumbing were not part of the original written contract, the contractor determined that because of the age of the pool the work needed to be done. While there was no written change order for this additional work, the court noted that the country club's representative knew that additional labor and materials would be required to fix the problem. The court ruled that the representative's knowledge of the additional work performed by the contractor and his failure to oppose such work amounted to authorization. The court found that the contract had been modified and the contractor was entitled to additional compensation.

The court next analyzed the additional work the contractor performed installing niches in the pool for lighting. While pool lighting was included in the original contract, installing niches was not specifically included. The court found that even though the contractor performed additional work, he was not entitled to additional compensation because it was implied that this work was included in the original contract. The contract provided that the contractor was responsible for providing all of the labor, materials, and equipment necessary to accomplish its work, including installation of pool lighting. The court ruled that because of the age of the pool the contractor should have known that niches would need to be installed in order to accommodate the lighting provided for in the contract. So the court ruled that the contract implicitly included the additional work and the contractor was not entitled to additional compensation.

Finally, the court examined the costs associated with providing additional concrete decking around the pool. Although additional concrete decking was not included in the original contract, the court found that the country club's representative was aware that additional decking was provided by the contractor. The court ruled that the representative's knowledge that additional decking was being provided coupled with his failure to object to the additional work amounted to an authorization of such work. Accordingly, the court ruled that the contract had been modified and the contractor was entitled to additional compensation.

As a result of this case, all contracting parties should be aware that silence, inaction, or implication can modify a written contract as easily as a written change order.

Gerald I. Katz is an attorney specializing in construction law throughout the United States with Katz & Stone LLP, Suite 600, 8230 Leesburg Pike, VA 22182

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