Owner (“O”) hires BuildCo (“B”) as general contractor to con…
Owner (“O”) hires BuildCo (“B”) as general contractor to construct a medical office building for a lump sum of $10 million. The contract includes: A “no oral modifications” clause, requiring written, signed change orders for any adjustments to price or schedule. A provision that only O’s “Authorized Representative,” named in the contract as the Director of Facilities, may approve change orders. A clause that progress payments are acceptance of work “to date,” but not a waiver of claims that have been properly reserved in writing.” During construction, O’s on-site project manager (“PM”), who is not the named Authorized Representative, discovers a significant design issue: the specified foundation is inadequate given subsurface conditions. PM emails B: “Proceed immediately with the deeper caissons and upgraded rebar; we’ll sort out the price in a change order later. We must keep the schedule.” B replies: “Understood. We’ll proceed with the revised foundation. We will seek an equitable adjustment to contract price and time, which we expressly reserve.” B performs the additional work. The cost of the extra foundation work, supported by detailed cost records, is $800,000 above what the original foundation would have cost. O’s accounting department, unaware of the unresolved change, later approves and pays several progress payment applications that itemize “Foundation Work – Extra Deep Caissons” in B’s schedule of values, but no formal, signed change order is ever issued. At project closeout, O refuses to pay the $800,000 extra, arguing: There is no written change order signed by the Authorized Representative, as required by the contract, and PM lacked authority to modify the contract. In a jurisdiction that follows mainstream U.S. common-law contract principles, which of the following is the most accurate statement about B’s likelihood of recovering the $800,000?
Read Details