Court affirms finding that construction contract was modified by conduct.

Contracts are often modified during construction projects by change orders and other written documents.  Construction contracts can also be modified during projects by oral discussions when the owner and contractor speak to each other.  Construction contracts can even by modified by the parties’ conduct.

In ABV Contractors Co. v. Cantor, 2023-Ohio-3363 (8^th Dist. 2023), the property owner retained a contractor to connect the property to the county’s sewer line.  The contractor’s original proposal only included running the new connection pipe to a certain point within the property.  On the first day of the project, however, the county inspector determined that the line would have to be run further, doubling the length of the job.  There were then discussions between the contractor and owner that additional work would be required but no specific pricing was discussed.

Part of the dispute became whether the contract had been modified to include the additional work required by the county since there had not been a written document evidencing the modification.  The court recognized that parties may implicitly modify an agreement by their actions.  The modification may be manifested by a continued, different course of performance.  The court determined that sufficient evidence existed to find an implied modification by conduct.  The owner had been present during the performance of the additional work.  The contractor had also consulted with the owner regarding the additional work to be performed.  Ultimately, the conduct of the parties, had modified the contract to include the new work to be performed.

The outcome was also affirmed despite the presence in the contract of a provision stating that all modifications had to be in writing.  The court recognized that even non-waiver provisions can be waived and the parties had waived it by their conduct.  The court also cited to past opinions that no-oral-modification clauses were disfavored.

Finally, the court addressed how the additional work had been priced for damages since even though the parties had modified the contract to include the new scope of work, they had not agreed on a price.  The contractor testified that he priced the work on a time and material basis.  The court found that although price is an essential element of a contract, the law could imply into the agreement that the cost was to be a reasonable, fair value price for such services.  As the owners had not challenged the reasonableness of the contractor’s time and material pricing, the T&M pricing was allowed to stand.

Nick Schwandner is an Ohio construction attorney who represents general contractors and subcontractors.  He represents contractors in litigation over payment disputes and other issues that arise during construction projects.