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TDOT could not hide behind terms of construction contract


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By Patricia Porter Kryder

The Tennessee Department of Transportation (TDOT) received funds through the American Recovery and Reinvestment Act to rebuild a Welcome Center along Interstate 65. The state of Tennessee engaged a team of architects and civil engineers to design the project. TDOT entered into an agreement with a contractor to construct the Welcome Center and adjacent roadways and parking lots. 

The contract provided that the contractor was to demolish and rebuild the Welcome Center. The state of Tennessee directed the contractor to provide additional work on the project, such as for concrete expansion joints. The original rendering of the project did not depict a grid pattern on the concrete—rather it showed diagonal lines spaced at thirty foot intervals without any intersecting lines. In addition to the concrete expansion joints, additional work for the concrete truck parking area, stone-fill installation at parking lots, and widening of the access road, was added to the contractor’s project.

As construction progressed, the contractor submitted requests for several changes to the scope of the project. These were denied. In addition, the state of Tennessee denied several pay requests for work that the contractor or its subcontractors had already completed that were beyond the scope of the original contract. The contractor then brought claims against the state of Tennessee alleging nine separate claims for damages. The Claims Commission ruled in favor of the contractor on all claims. The state of Tennessee appealed rulings as to four of the nine claims.

The Tennessee Court of Appeals considered issues related to written change orders. The Court reasoned that it is not uncommon for a construction contract to have written change order requirements under which the property owner receives formal notice that modifications are requested by the contractor in work to be performed, as well as in its compensation. The waiver of a written change order by a property owner may be as a result of the parties’ conduct on the job, and through a course of dealing between the parties. The Court reasoned that it is not uncommon for courts to find that an owner has waived a written notice requirement in cases where extra work has been ordered verbally by the owner or the extra work has been performed with the owner’s knowledge and without objection.

The Court agreed with the Tennessee Claims Commission that TDOT breached the contract when it had the contractor change the scope of the work without a written change order and then ratified the change after the fact. The Court reasoned that the state of Tennessee was estopped to hide behind the contract when it did not follow the terms of the contract. 

The Court held that the course of dealing between the parties made it clear that they did not intend to rely strictly on the contract’s formal change order requirements; rather, the parties implemented a system whereby the state of Tennessee’s on-site representative would suggest a change and the parties would later provide the paperwork to the state of Tennessee to ratify the change. Therefore, the Claims Commission did not err in awarding the contractor the additional costs.

 

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