What Is a Change Orders?

Plain-English Explanation

A "Change Orders" clause is a part of a contract that explains how changes to the work being done can be made after the contract is signed. This clause is important because sometimes, after a project starts, the person hiring the contractor or service provider might want to make changes to what was originally agreed upon.

The clause usually outlines the process for requesting changes. It might say that any changes need to be in writing and agreed upon by both parties. This helps make sure everyone is on the same page about what the new work will be and how it might affect the cost or timeline of the project.

In simple terms, a Change Orders clause is like a set of rules for how to handle changes to a project. It makes sure that if the project needs to be adjusted, both parties know exactly how to go about it.

Why This Clause Exists

The Change Orders clause exists to manage expectations and keep projects on track. In many projects, especially large ones, it's common for the original plan to need adjustments. This clause helps both the service provider and the client understand how to handle these changes without causing confusion or disputes.

From a business perspective, this clause ensures that any extra work or changes are documented and agreed upon. This can prevent misunderstandings about what work is included in the original contract and what is considered extra. It also helps in managing the budget and timeline since changes can often affect both.

Common Risks to Watch For

• The clause may be vague about what constitutes a "change," leading to disagreements.
• It could allow one party to demand changes without considering the impact on cost or time.
• There may be no clear process for how changes are approved, causing delays.
• The clause might be one-sided, favoring either the contractor or the client.
• Surprise costs could arise if the clause doesn't specify how changes affect pricing.

Example in Plain English

Imagine you hire a contractor to build a deck in your backyard. Halfway through the project, you decide you want the deck to be bigger than you originally planned. The Change Orders clause in your contract says that any changes need to be written down and agreed upon by both you and the contractor. So, you both sign a document that outlines the new size of the deck and the additional cost. This way, everyone knows exactly what to expect moving forward.

When This Clause Causes Issues

• If the process for approving changes is unclear, it can lead to delays in the project.
• Problems can arise if one party thinks a change is minor and doesn't require a formal change order, while the other party disagrees.
• Disputes may occur if the clause doesn't clearly state how changes impact the project's cost or timeline.

What to Do Before You Sign

• Ask whether the clause clearly defines what counts as a change.
• Check if the process for requesting and approving changes is clearly outlined.
• Inquire about how changes will affect the project's cost and timeline.
• Consider if the clause seems fair to both parties involved.
• Find out if there are any limits on the number or type of changes that can be made.