A new prison was under construction in Ohio. The sheriff visited the site often and had conversations with the electrical and systems contractors. He wanted to know operation details about security apparatus and door controls, including cell doors. The sheriff strongly suggested modifications.

On a federal courthouse renovation, judges walked through the construction and had very specific ideas about what electrical devices they wanted in their courtrooms, regardless of what was in the subcontracts.

An electrical subcontractor on a home improvement job, where the general contractor did not have a daily presence, had meetings with the owner. At those meetings, the owner directed multiple changes to lighting locations, types of motions sensors and security devices.

I am sure that you have had experiences where someone from the owner’s side suggests, demands or orders you to do work that is not part of your written subcontract. If you follow these directions, where do you stand on your contract rights to an extra? Do you have a right to be paid for obeying the owner’s instructions?

When changes are suggested

Jimmy Doolin was thinking of these problems because he had one of them. His company, No Fault Electric, signed a subcontract for electrical work on a new restaurant. The general contractor, Cyon Construction, was a broker—90% of its work was subcontracted. The restaurant owner, Stu Potts, seemed like a nice guy and was at the job nearly every day with his interior designer. He wanted his restaurant, the Pot O’Gold, to stand out and was always coming up with new ideas.

Hal Cyon, the president of Cyon Construction, was rarely on-site, so Stu Potts gave his ideas directly to Jimmy Doolin. An accommodating guy, Jimmy made the suggested changes, adding chandeliers, wall sconces, an enlarged sound system, etc. Jimmy collected his costs for labor and materials, wrote up change orders and gave them to Hal Smiley, who in turn put his 10% markup on the change orders and sent them on to Mr. Potts. So far, so good, although payment from Mr. Potts was very slow. After many weeks of this procedure, Hal Cyon told Jimmy that for future extras it would be easier if No Fault Electric just billed Stu Potts directly. (It turned out that Hal Cyon was not being paid and did not want to be on the hook to pay Jimmy.)

When the job was done, Jimmy was owed over $100,000 for the extras and for the base contract amount. His calls and letters to Hal Smiley and Stu Potts went unanswered. So Jimmy decided to sue, but that resulted in more uncertainty: Who should he sue?

Collecting money with no contract

Jimmy remembered an article in ELECTRICAL CONTRACTOR about collecting payment when there was no written contract (“Language of the Law,” August 2003), like the amount Jimmy’s company spent to satisfy Potts. The article said something about quasi contract. So Jimmy sued Potts, arguing that the work No Fault Electric did was at Mr. Potts’ directions, and Jimmy billed the owner directly with the approval of Cyon Construction. Jimmy’s lawsuit was based on quasi contract.

Potts filed a motion to dismiss Jimmy’s lawsuit. Potts said that his contract was with Cyon Construction, not with No Fault Electric, and that Cyon was the only one who could bill him or sue him. (Hal Cyon and his company seemed to have disappeared.) 

Potts also pointed out that he never promised to pay Jimmy’s company even though he had said something general like, “I’m sure to get you paid.” (Jimmy looked back at the article and saw that a definite promise to pay was needed to prove quasi contract.) Potts also argued that it was unclear what work in the lawsuit was really extra work and what was part of the original scope of Jimmy’s subcontract, and whether No Fault Electric had given credit for the value of the base contract work that was replaced by the alleged extras.

Jimmy was in a fix. He had nothing in writing from Potts about how the extras were ordered or about payment promises for the work. Jimmy’s general foreman had simply filled out time and material sheets to document the costs without referencing the drawings.

The judge thought that Jimmy had a good story and denied Potts’ motion to dismiss. But she told Jimmy that he had a mountain to climb to get any payment from the trial. (Jimmy’s story is based on actual events in “Horgan Bros, Inc. v. Monroe Property, LLC,” U.S. Dist. Ct. D.N.J. 2010).

What could Jimmy have done? Write down the owner’s orders, have him sign and then send a proposed change order to the general contractor. If the owner wants to take over, get a new signed contract with him and a release from the general contractor.

Do not wait so long to get paid.

Header Image: STOCK.ADOBE.COM / RTRO