The below is from a November 3 post by Bradley Bald on the Tennessee Bar Association’s website.
Journal Issue Date: November/December 2025
Communicating with Clarity: The Paramount Role of Change Orders in Construction
It is no secret that construction projects are complex. A contractor’s plans can easily change over time, and as everyone knows, mother nature waits for no one. The impact of delays and unforeseen circumstances can undoubtedly put pressure on construction teams to stay on schedule. As such, changes are inevitable and must be managed effectively by all parties involved in a project. These changes are typically accomplished via a “change order,” an industry term that is used to officially document modifications to a construction agreement.
In essence, a change order is a written amendment to a construction agreement that modifies specific terms. Change orders have been no stranger to construction over the years and are estimated to impact over 30% of projects.1 Change orders range from schedule and budget changes to specific client requests (e.g. design and/or minor cosmetic changes). A well-crafted change order provision should be clearly articulated in a construction agreement. A typical provision will state that changes to a contractor’s work should not be performed without an executed change order. Some agreements are even more limited and expressly state that if extra work is performed without a signed change order, no additional compensation will be granted.
In a perfect world, all changes would be documented in accordance with the contractual provisions of an agreement. This documentation would set forth a clear description of the change, the reason for the change, and its respective impact on the schedule and budget. When construction teams do not have a clear process to manage changes in construction, they often end up with communication problems, cost overruns, and delays putting all parties at risk.
Considering that field conditions are fast paced, there is an inherent pressure to stay on schedule. If additional work is required to complete a project, a subcontractor may decide to perform the additional work and forego a change order with the expectation of payment from the general contractor. There may also be a history between the parties where “handshake” agreements are the established norm and there is a good faith expectation of payment. Even if extra work was merely acknowledged (albeit verbally) with the understanding that such work would benefit a project, a general contractor or owner may still be on the hook for payment.
Exceptions to a Formal Change Order Provision
“What’s fair is fair”
There is a guiding principle in the business world that no one should unfairly benefit on another’s dime without paying appropriate compensation. This theory certainly rings true in construction. Tennessee case law has touched on such equitable principles of unjust enrichment to support arguments for a waiver of a change order provision: “a party who receives a benefit that he or she desires, under circumstances rendering retention of the benefit without providing compensation inequitable, must compensate the provider of the benefit.”2 In Los Pumas Concrete v. Harmony Hospitality LLC et al., the subcontractor filed a claim against the owner for its failure to make payments under the theory of unjust enrichment.3 The owner argued that because it already made payments to the general contractor for the subcontractor’s work set forth in the original subcontractor agreement, the owner was not required to pay any additional amounts for the improvements performed by the subcontractor.4 Considering the work was performed for its intended purpose, the owner benefited from the work, and the subcontractor performed the specific work under the change order, the court emphasized that it would be inequitable for the owner to retain the benefits without making payment.5 Even though the change order for the additional work was not signed by all parties, it was reasonable for them to anticipate that the work would incur additional costs.6 As such, the court found the owner liable for payment.7
Course of Dealing
Parties may intentionally (or unintentionally) waive a formal change order process based on prior actions and communications that create a “course of dealing” between the parties. The court in Moore Const. Co v. Clarksville Dep’t of Elec. nailed it: “The course of dealing between the parties can . . . amount to a waiver where the conduct of the parties makes it clear that they did not intend to rely strictly upon a contract’s written notice requirement and that adherence to such a requirement would serve no useful purpose.”8 Although the owner in Los Pumas Concrete stressed the contract’s requirement that all change orders be in writing, the contractor submitted evidence between the project management teams that established a course of conduct through prior on-site directions, personal knowledge from stakeholders, and their presence at multiple meetings throughout construction.9 As a result, the court agreed that the parties engaged in a “course of dealing such that their failure to adhere to the signatory requirement contained in the subcontractor agreement constituted a waiver of that requirement.”10
Guiding Principles for Construction Professionals
“When in doubt, write it out”
Above all, construction professionals should follow the golden rule: “when in doubt, write it out.” There should be a clear change order provision in the agreement that all parties can follow to prevent any potential conflict or misunderstandings. Teams need to make it clear to field personnel that strict and repeated compliance with contractually obligated change order provisions is a condition precedent to payment. They should also be conscientious of verbal “go-aheads” that may create the assumption of ordinary practice. By ordering extra work where both parties could reasonably anticipate that such work would increase costs, may, in and of itself, provide evidence that the parties waived a contract’s written requirement for a change order.
Create an Efficient Internal Management System
Through continuous on-site investigations of work-in-progress, all parties should be aware of any unauthorized work being carried out. Maintaining a manageable system of recordkeeping will provide easy access and clear directions to project members. By documenting all communications, teams can efficiently track all changes throughout construction and see the reasons for such changes.
Communicate, Communicate, Communicate
Construction professionals need to embrace proactive communication and collaborative decision-making to effectively manage change orders to enhance project efficiency and stakeholder relationships. Although change orders are a familiar concept in the construction industry, newly hired construction members may need to be educated on internal order processes to safeguard their company’s interests. Similar to the mindset of a sports team, clear communication will ensure that all team members are on the same page with the same goal in mind.
NOTES
1. Grace Ellis, What is a Construction Change Order? The Impact on Projects & Costs, AUTODESK.COM (Feb. 8, 2022, Updated Aug. 12, 2025) www.autodesk.com/blogs/construction/change-order/
2. Cole v. Caruso, No. W2017-00487-COA-R3-CV, 2018 WL 1391625, at *3 (Tenn. Ct. App. Mar. 20, 2018) (quoting Freeman Indus. LLC. v. Eastman Chem. Co., 172 S.W.3d 512, 525 (Tenn. 2005) (citing Paschall’s Inc., 407 S.W.2d at 154).
3. Los Pumas Concrete v. Harmony Hospitality LLC et al., 2021 Tenn. App. LEXIS 319 (Tenn. Ct. App. Aug. 11, 2021).
4. Id.
5. Id.
6. Id.
7. Id.
8. Moore Const. Co. v. Clarksville Dep’t of Elec., 707 S.W.2d 1, 13 (Tenn. Ct. App. 1985). (citing Copco Steel & Eng’g Co. v. United States, 341 F.2d 590, 598 (Ct. Cl. 1965)).
9. See n. 3, supra.
10. Id.