When to Use Promissory Estoppel - June 2022

Thu, Jun 30, 2022 at 8:00AM

Trent Cotney, Partner, Adams and Reese, LLP

As a contractor, you likely know that a clear, thorough contract is essential to every project. And you also know that when the owner requests extra work or any other revision, a written change order is required. However, there are times when the owner will argue that the change is urgent and request that you proceed without a written order. What are your options? 

Accommodating the Owner 

Most contractors will do just about anything to please the client, so you will likely want to accommodate the change request. Not doing so could jeopardize your relationship with this customer. But it is critical that you protect yourself.

If you do the requested work, you may incur extra expense and labor and the project may take longer than expected. Without a change order, you run the risk that the owner will refuse to pay you for that extra time and cost, despite any verbal assurances. Instead, the owner could point out that there was no written change order and leave you high and dry. Too many times, situations like these result in lawsuit and contractors have no evidence that they were asked to perform extra work. 

Protecting Your Interests 

If your owner insists on a change or extra work but offers excuses for not providing a change order right away, your best strategy could be promissory estoppel. “Estoppel” is a principle that prevents an individual from asserting something contrary to what has been implied by a previous statement or action. For example, in the case of a construction project, estoppel allows you to document a verbal agreement when a change order has not been provided.

Promissory estoppel is a letter that explicitly confirms the request for revised or extra work and that a change order has been promised. It also details the extra time, work and expense involved and it states the expectation that you will be paid for this extra effort. An important note: the estoppel includes the request that if any information in the letter is incorrect, the owner is to notify you in writing. If the owner fails to respond, you have written evidence that implies agreement to the conditions. Read more.

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