June 2019
Level With Me By JeremyWyatt
Maryland Law Can Help Subcontractors Collect on ‘Informal’ Change Order Work
When I review subcontracts for clients, it is not uncommon to see change order clauses including language such as, “no change order is effective unless it is in writing and signed by the contractor’s project manager.” Likewise, it is not uncommon for upstream contractors or owners to dispute the validity of change order work charges based on the defense that the upstream entity did not provide a written, signed change order authorizing the work or costs. Unfortunately, I regularly see the “no signed change order” defense asserted even when the upstream entity directed via email that additional work be performed, such as in the following example:
increasing the chance that informally ordered additional work will be compensated.
For example, Maryland’s Statute of Frauds, in a fashion similar to the change order clause described above, requires that certain kinds of agreements be both in writing and signed before a party can bring suit on them. Two common agreements falling within the Statute of Frauds are contracts relating to real estate and contracts for the sale of goods over $500. Historically, parties were required to sign a paper copy of an agreement with a pen to satisfy the Statute of Frauds, much as contractors have historically been required to obtain a formal, written and signed change order to have a clear path to compensation for additional work. Under Maryland’s Uniform Electronic Transactions Act (MUETA), however, neither a paper agreement nor a signature in ink is necessary to form a contract that satisfies the Statute of Frauds. Instead, if a party intends to do so, it can form a contract that satisfies the Statute of Frauds merely by sending an email with a signature line. The MUETA provides that, “[i]f a law requires a record to be in writing, an electronic record satisfies the law.” See Md. Code Ann., Comm. Law § 21-106(c). Likewise, “[i]f a law requires a signature, an electronic signature satisfies the law.” See Id. at (d). The Court of Special Appeals of Maryland has acknowledged that emails satisfy the Statute of Frauds in MEMC Elec. Materials, Inc. v. BP Solar Int’l, Inc., 196 Md. App. 318, 9 A.3d 508 (2010). In reviewing a series of emails that contained the terms of an agreement for
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To:
Subcontractor Bob Contractor
From:
Dear Sub:
Proceed with the additional work we discussed.
Bob Contractor Best Construction, Inc.
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Modern Maryland law may provide an avenue for subcontractors to fight back against the “no signed change order” defense,
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jwyatt@harrisonlawgroup.com
www.HarrisonLawGroup.com
(410) 832-0000
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