Problem 3 - FACTS: The Contract states: “The cost of reasonable street sweeping

Question

Problem 3 - FACTS: The Contract states: “The cost of reasonable street sweeping services shall be considered included in the Contractor’s price.” During construction, the Owner’s project manager told the Contractor: “Sweep the streets at least three times each week, but sweep as many times as needed to keep them clean.” The project manager orally instructed the contractor to keep track of extra hours and materials, and said, "We’ll take care of the paperwork at the end of the job." The Contractor did the work, and prepared Foreman’s Daily Reports of the extra hours and materials and submitted them to the project manager on a weekly basis. The Contractor did not file a written notice of claim as required under the contract terms.

ISSUE: Is there a change? Is it compensable?

Explanation / Answer

Yes, there is a change in the contract when the owner’s project manager orally instructed the contractor to keep track of extra hours and materials and by making an obligatory statement that company will take care of the paper work at the end of the job. This verbal commitment is the equivalent of a side letter, which modified the original contract. As per original contract, the cost of reasonable sweeping services is included in the contractor’s price.

However this oral commitment will turn into a binding contract upon the fulfillment of conditions of contract. These conditions are that both parties should enter into the contract without any pressure, and as per their free will. There should be an offer and a counter offer. Offer should be accepted to both the parties. There should be a consideration, which should be reasonable. In the present case, compensation part is missing.

The change is compensable, only when there’s an agreement. In the present case, the oral agreement is not sufficient, without the offer, counter offer and consideration. So The change might not be compensable.

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