The Legal Basis of a Change Order
Construction is a living process, and few projects finish exactly as first planned: drawings, materials, deadlines and the scope of work all change. Change order disputes arise precisely here — when the parties cannot agree on what the altered work is worth and who bears its cost. The legal assessment of such disputes begins with the rules on the contract for work: under Article 629, the contractor undertakes to perform the work provided for by the contract, while the customer must pay the agreed remuneration. A change, by its nature, goes beyond the work contemplated by the contract and requires a new agreement of the parties.
This nature of the contract also shapes the course of the dispute. What is decisive is whether the parties agreed on the additional work and on its remuneration: where an agreement exists, it must be performed like the contract itself; where none exists, the question becomes whether the request was part of the original work or an extension of it — a question answered by the content of the contract and the conduct of the parties, and not by one side's unilateral will.
Remuneration for Altered Work and Its Payment
The price of the change is regulated by Article 630: remuneration is deemed agreed even implicitly if, in the circumstances, the work is to be expected only for remuneration. Where the amount of the remuneration has not been agreed, the applicable tariff rate is deemed agreed if tariffs exist, and if no tariffs exist, the customary remuneration applies. In change order disputes this rule is often the pivotal point where the case turns to the level formed on the market because no written price exists.
The moment of payment is determined by Article 648: the customer must pay the contractor the remuneration after the completion of the work, unless the contract provides for payment by instalments. This basic rule extends to work enlarged by a change as well, so the documentation of the change and the fixation of its price are indispensable for preventing a dispute before it starts.
Cost Estimate Overruns and the Duty to Notify
Changes are frequently connected with an increase in the cost estimate. Article 631 provides: if the contractor significantly exceeds the approximate cost estimate, it may claim only the agreed remuneration, except where the excess could not have been foreseen in advance. Of such an unforeseeable increase the contractor must notify the customer immediately.
If the customer terminates the contract because of the increase in the estimate, it is obliged to pay for the work performed according to the approximate cost estimate. In the context of change orders this means that the value of an enlarged scope cannot become the contractor's unilateral decision — its value and remuneration must be agreed between the parties or determined by the rule established by law.
The Customer's Inaction and Compensation of Loss
In implementing changes, the customer's conduct also has legal consequences. Under Article 633, the contractor may claim compensation of loss if the customer does not accept the completed work. The customer is obliged to compensate the loss also where it fails to perform an action necessary for the performance of the work.
The amount of compensation is determined, on the one hand, according to the duration of the delay and the amount of the remuneration and, on the other hand, according to what the contractor would have earned by using its labour otherwise, had the customer not exceeded the term. In change order disputes it is precisely this calculation that becomes the battleground of evidence — site diaries, correspondence and schedules play the decisive role.
Frequently Asked Questions
Must the price of a change be agreed in writing?
The law deems remuneration agreed even implicitly where the work is to be expected only for remuneration; still, documenting the price and the scope is always the better way to avoid a dispute.
How is the price fixed if no amount was agreed for the change?
By the applicable tariff rate where tariffs exist, and otherwise by the customary remuneration.
May the contractor claim reimbursement of an increased estimate?
On a significant overrun it may claim only the agreed remuneration, unless the excess could not have been foreseen in advance; the increase must then be notified to the customer immediately.
What happens if the contract is terminated because of the increase?
The customer must pay for the work performed according to the approximate cost estimate.
When must the customer compensate loss?
Where it does not accept the completed work or fails to perform an action necessary for the work; the amount depends on the delay, the remuneration and the contractor's possible alternative income.
How We Help on Legal.ge
The lawyers of Legal.ge help clients prevent and resolve change order disputes: we will establish a procedure for documenting changes, assess the remuneration of altered work in accordance with the law, and defend your position with evidence once a dispute has arisen. Contact us on Legal.ge — we will help ensure that the changes of your project proceed in a legally orderly fashion and that your work is paid in full.