Contractors Beware - Louisiana Appeal Court Says Compliance with Building Codes is Not a Cause for Change Orders
This fall, the Louisiana 1st Circuit decided Bonvillain Builders LLC v. Gentile, finding that a property owner was not required to pay nearly $50,000 in requested change orders because the extra work was required under the original contract.
In Gentile, the construction contract required the contractor to meet all prevailing building codes. A situation arose with regard to the parish's drainage requirements, as the original design did not accommodate the code. The drainage study and total completed price for the drainage work was eventually tallied to cost $47k more than estimated.
The contractor wanted the property owner to pay for this, because it was an "unknown condition." The owner rejected the change orders arguing the contractor was responsible to meet prevailing building codes.
The Gentile court agreed with the property owner. According to the first circuit, the contract unambiguously required the contractor to comply with prevailing building codes. The fact that the designer and the contractor overlooked the drainage requirements and failed to properly provide for the the same in its plans and bid…did not pass the burden of paying for the drainage onto the owner. Instead, the contractor/designer was liable for the mistake.
The court found that the drainage requirements were not a "hidden condition" of the property, but merely, something the contractor and designer overlooked.
What Does It Mean For You?
Nearly every construction contract has a provision similar to the one in Gentile where the contractor (or sub) is required to meet prevailing building codes. When bidding on a project, its critical to bid responsibly. Failing to understand and accommodate the prevailing building codes applicable to the site can end up destroying the project's bottom line.
The real key is understanding what is and what is not a "change order." The term gets used so frequently by those working on a construction project, we sometimes forget its true meaning and warp the term to work to a party's convenience.
A change order is not issued overtime the cost of work or scope of work is greater than anticipated. It's only issued when the scope of work is changed.
If the owner adds a new complex to the plans, or requires a different quality of materials - this will likely result in a change order. However, if you simply didn't correctly estimate the amount of work that would be required for a task or misunderstood the prevailing building codes…a change order will not be an available remedy.
Like the situation in Gentile, you will be legally responsible for your own mistake.
Of course, this Gentile case will not likely apply to a scenario where a change is required because of a hidden site condition. If a hidden site condition is found, a change order is appropriate. The court in Gentile just clarified something that may seem a bit obvious: failing to take into account the building codes in the parish was not a hidden condition, regardless of whether it was or was not scoped in the original plans.
