Can Contract Time Can Increased By Oral Agreement?

Construction contracts very frequently contain provisions that require all changes orders to be approved in writing. In Louisiana, however, oral modifications to written contracts are allowed despite such provisions. Rhodes Steel Buildings, Inc. v. Walker Const. Co., 813 So.2d 1171.

At the trial level in Lantech Construction Co. v. Speed, the court’s ruling reflected this jurisprudence, requiring a property owner to pay for work performed by the contractor in six unwritten change orders. However, the trial court also required the contract or to pay $31k in liquidated damages for failing to finish the project on time.

The contractor’s argument was simple: If the written contract’s sum can be modified orally, so too can the written contract’s time – and that the unsigned change orders requested a change in the contract time & sum.

Going through the line of Louisiana cases regarding oral changes to written construction contracts, the appeals court agreed with the contractor.

…[T]he law is clear that written contracts may be modified by oral contracts and the conduct of the parties, even when the written contract contains a provision that change orders must be in writing. Modification of a written agreement can be presumed by silence, inaction, or implication. The party who asserts that an obligation has been modified must prove by a preponderance of the evidence facts or acts giving rise to the modification. It is a question of fact, therefore, as to whether there were oral agreements that modified the written contract. Oral modifications alleged to be in excess of $500 must be proved by at least one “credible witness” and “other corroborating circumstances.” Only general corroboration is required. Parol evidence is admissible for this purpose.

The court reversed the award of liquidated damages against the contractor, ruling that after application of the contract time extensions the project was not delivered late.

This blog post was originally published on Wolfe Law Group’s topic-specific Louisiana Construction Law Blog.

Posted in: Change Orders, Construction Contracts, Louisiana
Tags: ,,,,