Where A Public Works Contract Requires Amendments To Be Written, An Oral Modification (Including Oral Approval Of Change Orders) Cannot Be Enforced

By: Eric A. Bevan, K&L Gates LLP, Los Angeles

P&D Consultants, Inc. v. City of Carlsbad, 190 Cal. App. 4th 1332 (2010)

The City of Carlsbad (“the City”) contracted P&D Consultants, Inc. (“P&D”) to redesign the City’s municipal golf course project to comply with conditions imposed by the California Coastal Commission.  The contract, originally for $556,745, provided that it could not be modified or amended except through written agreement signed by both parties.  The parties entered into a five written amendments that approved extra work and increased the original contract price by $63,525.50.  In each instance, P&D submitted a proposed change order with a fixed price to the City’s project manager.  The City usually took several weeks to execute a resulting contract amendment and the City’s project manager frequently authorized P&D to start the extra work before the written contract amendment was executed.  P&D eventually sought an additional $109,093.81 for what would have been the sixth amendment to the contract.  P&D contended that the City’s project manager had orally instructed P&D to proceed with the work and provided assurances that the sixth amendment would be approved.  The jury awarded P&D $109,093.81 for extra work.  The City appealed, contending that the jury’s award of damages could not stand because there was no written change order authorizing P&D to conduct the extra work.

The Court of Appeal ruled that, unlike private contracts, public contracts requiring written change orders cannot be modified orally or through the parties’ conduct.  Persons dealing with a public agency are presumed to know the law with respect to any agency’s authority to contract.  Where a public contract requires amendments to be in writing, an employee of the public agency does not have authority to modify the contract through oral agreements or conduct.  Thus, even if P&D had presented adequate evidence indicating that a City employee orally authorized the extra work, P&D still could not prevail because the public contract could not, as a matter of law, have been modified.  The Court of Appeal ruled that the matter should not have been submitted to the jury and a non-suit should have been entered in favor of the City.  The Court of Appeal reversed the award of damages in favor of P&D.

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