Oral Change Order at a Tumon Hotel Renovation
Tumon Bay Hotel hires Pacific Builders as general contractor for a $4.2 million renovation of 120 rooms. Pacific subcontracts the electrical work to Isla Electric for $680,000. The subcontract states: 'No change order is valid unless in writing and signed by Owner's Representative.' During demolition, Pacific's project manager orally directs Isla to reroute conduits around newly discovered asbestos, saying 'proceed, we'll paper it later.' Isla performs the $95,000 extra work. The project manager later emails 'looks good' but never signs a change order. The owner refuses to pay, citing the written-change clause. Isla shows six prior oral directives; four were later confirmed in writing, one was paid without a signature, and one was disputed but paid after a meeting. Isla's president testifies the project manager had authority to direct field work. Isla sues Pacific and the owner.
1. Is the oral change order enforceable despite the written-change clause?
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The written-change clause is not absolute. Construction subcontracts are governed by common law, not UCC Article 2. A clause requiring written, signed change orders can be waived by course of dealing, course of performance, or estoppel. Isla has six prior oral directives. Four were later confirmed in writing, one was paid without a signature, and one was paid after a dispute meeting. That pattern shows the parties did not treat the writing requirement as a condition precedent to payment. The project manager's email 'looks good' is additional evidence that the extra work was authorized. Isla also relied to its detriment by performing the $95,000 reroute. The owner cannot accept the benefit and then hide behind the clause.
2. Who is liable-Pacific, the owner, or both?
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Liability. The project manager had apparent authority to direct field work. A project manager on a $4.2 million hotel renovation ordinarily has authority to deal with unforeseen site conditions and to direct the subcontractor to proceed. The owner held him out in that role. Pacific, as general contractor, is contractually responsible to Isla for its project manager's directives. The owner may also be liable in unjust enrichment or quantum meruit because it received the benefit of the rerouted conduit. The owner's internal instruction to the project manager does not bind Isla unless Isla knew of it.
3. What damages are recoverable, and what defenses remain?
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Damages. Isla can recover the reasonable value of the extra work-$95,000-plus any proven delay or overhead caused by the reroute. The measure is not the contract price for work never scoped; it is the cost of labor, materials, and reasonable overhead and profit. Pacific may seek indemnity from the owner if the owner authorized the work. The owner's defenses are waiver and estoppel; the no-written-change clause is weak against the course of dealing. Isla should also check whether a Guam statute of frauds applies, but a construction contract that can be performed within a year is generally outside it. The email and part performance supply additional proof.