Texas Construction Law Blog

While change orders are widely viewed as a mechanism to increase the contract price in a construction contract, sophisticated players understand that change orders can and should be used to manage claims. 

From the owner’s perspective, change orders are often used to finalize compensation and delay days for specific changes or for all work through the execution of the change order. Examples of helpful waiver language from the owner perspective can be found in several recent cases. First in MMR Constructors, Inc. v. The Dow Chemical Co., No. 01-19-00039-CV, 2020 WL 7062325, at *7–*9 (Tex. App.—Houston [1st Dist.] Dec. 3, 2020, no pet.), the owner headed off delay claims using the following language in every change order:

THIS CONTRACT MODIFICATION REPRESENTS FINAL ADJUSTMENT FOR ANY AND ALL AMOUNTS DUE OR TO BECOME DUE TO CONTRACTOR FOR CHANGES REFERRED TO HEREIN. CONTRACTOR FURTHER RELEASES ALL OTHER CLAIMS, IF ANY (EXCEPT THOSE CLAIMS PREVIOUSLY SUBMITTED IN WRITING IN STRICT ACCORDANCE WITH THE CONTRACT), FOR ADDITIONAL COMPENSATION UNDER THIS CONTRACT, INCLUDING WITHOUT LIMITATION ANY RIGHTS CONTRACTOR MAY HAVE FOR ADDITIONAL COMPENSATION ARISING OUT OF DELAYS OR DISRUPTION OF CONTRACTOR'S SCHEDULE AS MAY HAVE ARISEN PRIOR TO THE DATE OF THIS CONTRACT MODIFICATION. UNLESS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE TIME OF COMPLETION AND ALL OTHER TERMS AND CONDITIONS OF THE CONTRACT REMAIN UNCHANGED.

In Wood Grp. USA, Inc. v. Targa NGL Pipeline Co., LLC, No. 01-21-00542-CV, 2023 WL 5280249, at *11 (Tex. App.—Houston [1st Dist.] Aug. 17, 2023, pet. denied), the owner successfully prevailed on its argument that the contractor waived its right to try to get more money at the end of the project for changes compensated at the beginning through the following language in an EPC agreement:

The parties agree that Change Orders approved under the terms of the Agreement shall constitute a full and final settlement and accord and satisfaction of all effects of the change as described in the Change Order upon the Changed Criteria and shall be deemed to compensate [Contractor] fully for such change. Accordingly, [Contractor] expressly waives and releases any and all right to make a claim or demand or to take any action or proceedings against [Owner] for any other consequences arising out of, relating to, or resulting from such change reflected in such Change Order, whether the consequences result directly or indirectly from such change reflected in such Change Order, including any claims or demands that any Change Order or number of Change Orders, individually or in the aggregate, have impacted the unchanged Work.

More streamlined language was still found to be enforceable in Harris Cnty. v. Pulice Constr., Inc., No. 14-23-00818-CV, 2024 WL 4052762, at *10 (Tex. App.—Houston [14th Dist.] Sept. 5, 2024, no pet. h.) to waive claims where an earlier change order pertained to the same work:

[t]he Contractor must sign only when the Change Order contains extra work or price modification or if the character of the work changes significantly. The Contractor further agrees that for the consideration in this change order, [Owner] will not pay for any additional charges for time, expense, overhead and profit or loss due to this change.

Use of similar language in change order forms and in the body of agreements is helpful to avoid later cumulative impact and productivity changes. Additionally, tracking changes to the schedule in change orders can help both parties to determine how changes affected the schedule.

Naturally, contractors may seek to preserve claims, particularly where the amount of a claim is not known. Parties should be aware that courts seems to have adopted the approach that change orders should include the final settlement of costs relating to a change—often including delays relating to the change. Language in a form change order or in contracts which permits a contractor to reserve its rights can be helpful in such a situation. Typically, provisions protecting rights to reserve claims are best negotiated during the contracting stage which requires advance planning.