Court Decision Specifies Ways in Which a Construction Contract Can Be Modified

Court Decision Specifies Ways in Which a Construction Contract Can Be Modified

In Driver Pipeline Co., Inc. v. Cadeville Gas Storage, LLC, the Second Circuit Court of Appeal held that a written construction contract may be modified by the parties through oral agreement or their conduct, even when the contract provides that change orders must be in writing.

In Driver, the contractor, Driver Pipeline Co., Inc., entered into a contract with Cadeville Gas Storage, LLC, as owner, to construct natural gas pipelines and facilities in connection with a storage facility. The contract price was $5,430,130. After extensive delays on the project, Driver submitted approximate $3 million dollars in construction change orders to Cadeville. Some of the work in the change orders had already been performed by Driver.

The Court found the trial court in error for granting Cadeville’s motion for summary judgment. The reasoning was based upon the Court’s opinion that the facts of Driver fit into  previous jurisprudence allowing parole evidence to establish a contract had been changed through silence, inaction, or oral agreement. Specifically, the Court reviewed an email between Cadeville and Driver where Cadeville had instructed Driver to “proceed accordingly,” which established there were material facts precluding summary judgment.

The jurisprudence allowing for changes in construction contracts based upon the conduct of the parties was a primary focus of the Court in Driver. The decision should be a reminder to contractors that changes, despite adverse contractual provisions, may be upheld in court. Evidence establishing the change was accepted, such as emails, letters, or discussions of the parties could allow for recovery of change orders in lieu of formal written authorization for the change.

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