Change order: Overview, definition and example
What is a change order?
A change order is a formal agreement to modify the terms, scope, or details of an existing contract after it has been signed. It’s a way to handle changes in projects or agreements without starting over with a new contract. Change orders typically outline what’s being changed, how it affects the timeline or cost, and any new responsibilities.
For example, in a construction project, a client might request additional features not included in the original plans. A change order would document this adjustment, including any extra costs and deadlines.
Why is a change order important?
Change orders are important because they ensure that any modifications to a contract are clearly documented and agreed upon by all parties. This helps avoid misunderstandings, disputes, or unexpected costs down the line.
For businesses, change orders provide flexibility to adapt contracts to new needs or circumstances while maintaining clarity about the updated terms.
Understanding change orders through an example
Imagine a software company is developing a custom app for a client. Halfway through the project, the client requests additional functionality that wasn’t part of the original contract. Instead of rewriting the entire agreement, the parties create a change order that outlines the new features, the extra development costs, and the extended delivery timeline. This keeps everything organized and ensures both parties agree on the updates.
In another case, a contractor is building a commercial property, and the client decides mid-project to upgrade the flooring materials. A change order specifies the new materials, the added cost, and the impact on the project’s timeline. This formalizes the adjustment and prevents confusion later.
An example of a change order clause
Here’s how a change order clause might look in a contract:
“Any modifications to the scope, cost, or timeline of this Agreement shall require a written Change Order signed by both Parties. No changes shall be effective unless documented and approved in writing.”
Conclusion
A change order is a formal way to modify a contract’s terms after it’s signed, ensuring both parties agree to and document the changes. It provides flexibility while keeping the project or agreement clear and organized.
By using change orders, businesses can adapt to evolving needs or unexpected situations without compromising the clarity or enforceability of their contracts. It’s about balancing flexibility with accountability.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.