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The Impact Change Orders Have on Your Contract

change order picEven if you spend a lot of time strategizing and negotiating your business contracts , not every situation that can arise is foreseeable and changes to the original agreement may be necessary. Thus, it is important to cover in the original contract how change orders will be handled as well as how they will impact the contract. The term “change order” refers to services and/or products that are added or removed from the scope of the contract. This type of change alters the agreed upon amount to be paid and/or the deadline for the completion date.

Change orders are commonly used in a variety of different industries, particularly those that involve large projects that take a significant amount of time to complete. The original agreement that sets forth the total amount to be paid and the deadlines that must be met may become outdated or fail to accomplish a necessary goal of the parties. When a party requests that an original term be altered and a new approach be taken, it changes the order which also changes the terms of the contract.

Change orders can cover a variety of factors, but below are common examples of topics that are commonly included in change orders:

  • An error occurred in estimating the amount of product that was needed for the project
  • Unforeseen obstacles have arisen that require a deviation from the original plan
  • Additional time, money or resources are needed due to complications or inefficiencies
  • Weather conditions caused delays in completing the project
  • New and additional options have been requested

A change order should clearly state the new work to be performed (or not performed) or clearly identify the extra products to be delivered (or removed) from the original order. It is important to adjust the price as necessary and clearly state the new amount due. When the parties have reached an agreement on the terms of the change orders, it becomes an amendment to the original agreement and becomes a part of the contract. Thus, it is essential that you keep a fully executed copy of all change orders for your records.

The Swenson Law Firm is located in Sacramento County and we proudly serve businesses of all sizes from all over the State of California, Nationally and Internationally. Contact us today to learn more about how we can assist you with matters such as trademarks, defending lawsuits, business formation, contract negotiations, hiring employees, and protecting your intellectual property.

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