Insight

Small Case, Important Principles for Written Agreements

The Louisiana state Court of Appeals for the Fifth Circuit's recent ruling could spell big things for written arguments in the future.

What a New Case Means for Written Contracts
Robert M. Steeg

Robert M. Steeg

February 27, 2019 02:37 PM

A relatively small case, recently decided by the Louisiana State Court of Appeal for the Fifth Circuit illustrates two important principles:

  • First, a court will often find a way to get around legal technicalities when they are being used by a party to achieve what the court perceives to be an unfair result; and
  • Second, written contracts may always be modified orally or by the conduct of the parties, so be careful what you say and do after the ink is dry.

Vinet vs. D and M Renovation, L.L.C., et al

In the case of Vinet vs. D and M Renovation, L.L.C., et al, Mr. and Mrs. Vinet were homeowners who hired a contractor to perform various repairs, pursuant to a written construction contract. During the course of the work, the homeowners requested various changes and additions to the work, including the addition of a second Jacuzzi tub, installing a clothing dryer vent and a hall furnace vent, changing certain floors from laminate tile to more expensive ceramic tile, and installing bi-fold doors instead of standard doors in the kitchen, hall, closet and living room. In other words, the modifications were meaningful and clearly went above and beyond the original work that was the subject of the written contract.

At the end of the job, the homeowners felt that the contractor had performed shoddy work. As part of the homeowners’ overall dispute with the contractor, the homeowners refused to sign a written change order for the additional work, claiming that the contractor had agreed to include all of the extra work for no additional charge.

The Rulings

The trial court held that the contractor was entitled to receive payment for the additional work, and the appeals court agreed. Both courts clearly felt that the homeowner was withholding payment for the additional work as “leverage” in the larger dispute over the contractor’s allegedly shoddy performance.

On the facts, the trial court held that the contractor’s work was not defective or shoddy, and the appeals court did not disturb these findings of fact.

Then the appeals court turned to a question of law, which is where this case is instructive for all persons dealing with written agreements of any kind.

The construction contract at issue contained a provision to the effect that any changes in the specified work would require a written change order, after which the cost of the additional work would be added to the contract sum. Further, the contract provided that “[a]ll agreements must be made in writing.”

The homeowners did not deny requesting the contractor to perform the additional work. However, the homeowners contended that without a written change order, the additional work was unauthorized and the cost thereof could not be added to the amount owed to the contractor under the construction contract.

In order to achieve the “fair” result of requiring the homeowners to pay the contractor for the additional work that the homeowners had admittedly requested and received, the appeals court made the following rulings, as a matter of law:

  1. Written contracts may be modified by oral contracts and/or by the conduct of the parties.
  2. The conduct of the parties may include silence, inaction or implication.
  3. By oral agreement and/or the conduct of the parties, the parties may modify the very provision of a contract that requires changes to be in writing.

In this particular case, the homeowners had requested the changes and had observed them being performed. The homeowners lived in the house while all of the construction work was going on, and so they observed the additional work. There was no question that the additional work was performed, and was over and above the work as originally described in the written agreement.

By their conduct, then, the homeowners modified the provision of the written contract that required all changes to be in writing. If they had intended to comply with the provision requiring all change orders to be in writing, they would have refused to receive the additional work or would have objected that the additional work was being performed without a written change order. Their inaction showed that they were not requiring compliance with the letter of the written contract, and thus achieved a modification of the terms of the written contract.

The Bottom Line

Based solely on a reading of the published decision of the Fifth Circuit, this would appear to be a fair and equitable result. However, go back and read the legal points 1-3 above. They could lead to unanticipated consequences in any number of other contract scenarios.

The bottom line is that if you willingly and agreeably act in a manner that is outside of the terms of a written contract, you may well be deemed to be modifying the terms of that written contract as you do so – even the terms of the written contract that forbid non-written modifications. The written contract may not contain the “entire” agreement of the parties, after all.

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