How Do the French Say "Change Order?"

Okay you contractors, pull out your high school French books. It may save you beaucoup bucks someday.

Consider the following true story as relayed by the Oregon Court of Appeals in a very important construction law case, State v. Triad Mechanical, 144 Or App 106 (1996).

The lawsuit involved a dispute between the Oregon Department of Fish and Wildlife ("ODFW") and Triad Mechanical, Inc. Triad and ODFW entered into a written contract to construct improvements to the Oak Springs Fish Hatchery.

The contract between Triad and ODFW specified that 100 cubic yards of rock were to be excavated and that excavation in excess of 100 cubic yards would result in a change to the contract. As life and luck would have it, Triad and its subcontractor encountered more than 100 cubic yards of rock. Triad, the sub, and ODFW met to discuss the change.

According to Triad, at the meeting, ODFW agreed to pay a fixed unit price for the direct cost of removing the additional rock and, further, ODFW agreed to postpone a determination of delay and impact costs, since those costs could not be determined at the time of the meeting. Triad believed it had ODFW's agreement to address and resolve the delay and impact costs at the end of the job.

Unfortunately, Triad then signed two written change orders addressing the costs per cubic yard for the additional rock excavation. The two change orders made no mention of an agreement that a claim for delay and impact costs would be submitted at the end of the project. At the end of the job, ODFW disputed Triad's understanding of the agreement.

You might guess that the matter would be settled at trial, eh? Tough cross-examination of both sides' witnesses would be sure to get at the truth, don't you think?

Not so fast.

And here's a little French lesson from the Oregon Court of Appeals: Triad's oral testimony about its agreement to postpone determination of delay and impact costs was barred by the "parol evidence" rule.

The what rule?

Dust off your textbook: The French word for "word" is "parol." The rule the court cited dates back to the early days of the common law, much of which came from France after the Norman Conquest.

So, "parol evidence" refers to "oral evidence." It is a longstanding principle in the law that oral evidence is not admissible to contradict the terms of a written agreement, at least when the written agreement, on its face, appears complete.

The court ruled that the two change orders signed by Triad appeared complete, that Triad's oral evidence would contradict the express terms of the written change order, and, therefore, Triad's oral testimony could not be admitted into evidence. As a result, Triad was not allowed to submit evidence of delay and impact costs in the six-figure range. Now, isn't that an expensive French lesson?

Perhaps, but the public policy behind the parol evidence rule is sound: the rule is intended to encourage business people to put their agreements in writing so there won't be disputes about them later on.

For contractors, the real French lesson is this: make sure your change orders include all of the terms of your agreement. If you plan to postpone a determination of some portion of the costs, make darn sure you say so in the change order itself. Otherwise, you may not be allowed to prove that part of your agreement in court.

Comprenez-vous?

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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