May 2002
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
Construction contracts normally require written authorization for extra work. These provisions are generally enforceable and the failure to obtain written authorization may result in the inability to recover the costs of extra work. The requirements may be waived when the owner has knowledge that the extra work is performed on the oral instructions of authorized personnel. Additionally, a course of conduct between the parties may result in the modification or waiver of a contract provision requiring written authorization. In a recent case, Tridee Associates v. New York City School Construction Authority, the Appellate Division addressed a claim for extra work where there was no written authorization.
Background
Tridee Associates, Inc., leased its building to the New York City Construction Authority for use as a public elementary school. The authority assigned the lease to the Board of Education of the City of New York. The lease provided that the landlord, Tridee, would provide the "necessary alterations and improvements" so that the premises would be suitable for school use. According to the lease, the board was to reimburse Tridee for the costs incurred for the alterations and improvements. That amount could not exceed $750,000.
The lease contained no provision for change orders or extra work. The lease did state, however, that it set forth the entire agreement between the parties and that the lease could only be modified by a writing signed by both parties.
Tridee performed the work which was specified in the "scope of work" annexed to the lease. In addition, pursuant to the board's direction, Tridee performed extra work costing $430,634.75. While Tridee was reimbursed $750,000 for renovations and improvements pursuant to the terms of the lease, it was not paid for the extra work. According to Tridee, the board requested numerous changes and extras for which it represented it would pay Tridee.
Tridee sued the board to recover on its extra work claim. Tridee argued that the board orally directed it to perform the extra work and consented to that work. The board claimed that there was no written authorization for the extra work as required by the contract. The lower court denied the board's summary judgment motion to dismiss the complaint and the Board appealed.
Decision
The Appellate Division affirmed the lower court's decision, holding that Tridee's extra work claim was not precluded by a clause in the lease that it could only be modified by a writing signed by both parties. Under New York law, oral directions to perform extra work, or the general course of conduct between the parties, may modify or eliminate contract provisions requiring written authorization. The court said that a provision in the contract which requires that there be written authorization for extra work can be waived under certain circumstances.
The court held that there should be a trial to resolve the issues of fact as to whether the extra work performed by Tridee was at the board's request and whether the board waived the requirement that any changes to the contract be in writing. The court added that, assuming that the board was correct in its argument that the individuals who requested the extra work did not have the authority to bind the board, there remains a triable issue of fact as to whether the board ratified the changes and extra work.
Dissent
One of the appellate judges dissented and voted to grant the board's summary judgment motion to dismiss the complaint. He pointed out that the lease contained no provision for change orders or extra work. Moreover, he relied on the contract clause which provided that the "lease sets forth the entire agreement between the parties superseding all prior agreements and understandings, written or oral, and may not be altered or modified except by a writing signed by both parties." According to the dissenting judge, that contract clause and General Obligations Law bars oral modification of the agreement. That statute prohibits a subsequent oral modification where the written agreement provides that it may not be modified orally.
The dissenting judge further stated that there was no proof that the claimed additional work was authorized by the board. He concluded that even where municipalities have accepted benefits, they should not be held liable under unauthorized agreements. "To hold otherwise would preclude a municipality from contractually limiting its obligations."
Conclusion
The majority of the appellate court in this case apparently were influenced by equitable considerations in arriving at its decision. It would be unfair to preclude Tridee from recovering on its extra work claim if it can establish that the extra work performed was clearly requested by the board and the board accepted the benefits of such work. It is always better practice, however, to obtain written authorization for extra work, rather than litigate the issue of whether certain acts or a course of conduct between the parties constitutes a waiver of the contractual requirements.
About the author: Mr. Miuccio is a partner in the New York City-based law firm Altieri, Kushner, Miuccio & Frind, P.C. and legal counsel to the Construction Industry Council of Westchester and the Hudson Valley, Inc.