#65: Unjust Enrichment Recovery for Verbal Change Orders
Given the importance of nailing down any changes to an original scope of work along with their price and schedule effects, many construction contracts require change orders to be in writing, and even define change orders as written instruments. Section 7.2.1 of the A201 (2007) is typical: “A Change Order is a written instrument prepared by the Architect and signed by the Owner, Contractor and Architect.” Some contracts are even more limiting, expressly stating that if extra work is done without a signed change order, no additional compensation can be claimed.
What if an owner orders a change but never prepares the written change order? What if the contractor prepares a change order himself but the owner ignores it? Should he suspend work, and risk being in breach? There may be another option. If he proceeds with the work on the reasonable expectation of getting a change order signed later and doesn’t get it, he still has a shot at “unjust enrichment” recovery — a remedy allowed by courts when an individual receives “a benefit which would be unconscionable for him to retain,” Clapp v. Goffstown Sch. Dist., 159 N.H. 206, 210 (2009).
Unjust enrichment recovery “may be available to contracting parties if the benefit received is outside the scope of the contract,” Axenics, Inc. v. Turner Construction Co., 164 N.H. 659, 670 (2013), but not if the parties’ contract addresses the subject matter of the claim. In Axenics a subcontractor’s claim against a general contractor for “failure to properly coordinate construction” was rejected because the GC’s coordination responsibility and the sub’s entitlement to payment for any resulting extra work or extra costs “was addressed in the subcontract itself.” The Court explained that “the terms of the subcontract expressly addressed the possibility of delays and hindrances as well as the process by which Axenics would receive payment for any extra work that it performed because of change orders. The subcontract also established a mechanism for proceeding when Axenics believed the ‘work to be beyond the scope of’ the subcontract, and delineated Turner’s responsibilities for coordinating changes to the work. Since the subcontract governed the subject of Axenics’ unjust enrichment claim, and the subcontract was not abandoned by the parties, the trial court erred in allowing Axenics to recover against Turner under a theory of unjust enrichment.”
Notice that Axenics did not seek compensation for an added scope of work, but for making an existing scope more expensive to perform. Added scope sounds like a candidate for unjust enrichment on grounds that “the benefit received was outside the scope of the contract,” id. But I hesitate to equate a contractual scope of work with “scope of the contract.” Contractors speak that way. Judges don’t. For them, “scope of the contract” is broader, encompassing not only the work to be done but all of the terms and conditions impacting the performance of that work.
Still, any contractual provision can be modified by the parties — including a provision requiring that change orders be in writing. “Parties to a contract can not, even by an express provision in that contract, deprive themselves of the power to alter or vary or discharge it by subsequent agreement. An express provision in a written contract that no rescission or variation shall be valid unless it too is in writing is ineffective to invalidate a subsequent oral agreement to the contrary.” Prime Financial Group, Inc. v. Masters, 141 N.H. 33, 37 (1996). Ordering extra work that both parties should reasonably anticipate will entail extra costs, particularly when accompanied by insistence that it be done promptly before a change order is prepared and signed, is evidence from which a court might infer an agreement to modify the requirement that change orders must be signed before extras can get paid.