The Unlicensed Site Supervisor's Change Order
Halvorsen Contracting won a public school renovation bid at $1,840,000. The contract required all change orders over $25,000 to be approved in writing by the district's facilities director. Mid-project, a district architect told Halvorsen's site supervisor by phone to relocate two HVAC runs, saying "just do it, we'll paper it later." The supervisor, who held no contracting authority, complied. The relocation cost $61,400. The facilities director later refused to pay, citing the written-approval clause and asserting the architect lacked authority. Halvorsen argues the district accepted the benefit and that the architect had apparent authority because he had signed prior change orders under $25,000. Separately, Halvorsen missed an unrelated deadline by nine days, and the district now threatens to terminate and back-charge 12% overhead on the remaining work.
1. Analyze whether Halvorsen can recover the $61,400 despite the written-approval clause. Address actual authority, apparent authority, and ratification.
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Start with actual authority. The contract text is the controlling grant: only the facilities director may approve changes above $25,000, and only in writing. The architect's phone instruction therefore falls outside actual authority, and the supervisor's own lack of authority means Halvorsen acted at its own risk. Apparent authority requires a manifestation by the principal (the district), not by the agent. The fact that the architect signed smaller change orders shows the district cloaked him with authority for transactions under $25,000; a reasonable contractor could not extend that to a $61,400 change, especially where the contract expressly reserved larger approvals. The scope of apparent authority tracks the objective manifestations, so the ceiling defeats the claim.
Next, ratification. A principal may ratify an unauthorized act by retaining benefits with knowledge of the material facts. Here the district has not accepted the work with knowledge; it is disputing the charge. Retention alone is not ratification if the principal lacked knowledge or protested promptly. Halvorsen should document when the district learned of the relocation and whether it used the HVAC system.
Finally, quasi-contract/unjust enrichment is generally unavailable where an express contract governs the same subject, and public entities often have statutory limits on implied contracts. The strongest practical path is a written, retroactive change order approved by the facilities director, or a settlement offset against the deadline dispute. Advise: no recovery is likely on the current facts; pursue ratification evidence and negotiate.
2. The district wants to terminate for the nine-day delay and back-charge 12% overhead. What must the district establish, and what defenses should Halvorsen raise?
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Termination for cause requires (1) a material breach, (2) notice and an opportunity to cure where the contract or law provides one, and (3) compliance with any contractual cure period. A nine-day delay is a breach only if the contract makes time of the essence and the delay is material; courts weigh the magnitude, whether the delay was excusable, and whether the owner suffered actual harm.
Halvorsen should raise: excusable delay (weather, owner-caused disruptions such as the HVAC instruction, or supply-chain events covered by a force-majeure clause); waiver if the district previously accepted late milestones without objection; and proportionality - termination for a nine-day slip on a $1.84M project may be a disproportionate remedy, and a court may treat it as a breach by the owner if termination is wrongful.
The 12% overhead back-charge is a liquidated-damages-like assessment. It is enforceable only if it is a reasonable forecast of anticipated harm at contract formation and not a penalty. Twelve percent of remaining work is facially large; the district must show it approximates actual added supervision and re-procurement costs. Halvorsen should demand the calculation, the cure notice, and any prior waivers. Recommended posture: cure immediately, document the owner-caused delay, and negotiate the overhead figure down to actual documented costs.