Construction projects rarely unfold precisely as planned. Timelines shift, budgets get stretched, and new demands can emerge from owners, contractors, or third-party stakeholders. Among the most common (and potentially costly) challenges that arise during Ontario construction projects are change orders and scope creep. Both can lead to project delays, cost overruns, and lengthy legal disputes when left unmanaged.
Understanding the legal and contractual implications of change orders and scope changes is crucial for those involved in construction, whether owners, general contractors, subcontractors, or consultants.
Change Orders vs. Scope Creep
Change orders and scope creep both involve alterations to the original construction plan, but they differ significantly in nature and legal treatment.
A change order is a formal, documented modification to the original contract. It may relate to costs, timelines, specifications, or work scope, and must be approved by the relevant parties. Change orders are part of the contract administration process and, when handled properly, offer a legitimate and structured way to address evolving project needs.
Scope creep, on the other hand, refers to incremental, often undocumented changes that expand the original project’s scope without proper authorization or corresponding adjustments to cost or schedule. Scope creep tends to evolve informally, frequently through verbal instructions, on-site decisions, or vague communication. While change orders are recognized and enforceable when appropriately documented, scope creep creates legal ambiguity and increases the risk of dispute.
The Role of the Construction Contract in Managing Changes
The construction contract is a foundational tool for managing change and risk. Well-drafted contracts should contain clear provisions outlining how changes to the work are to be initiated, documented, approved, and priced.
Key elements include:
- A process for submitting and approving change orders
- Timelines for notification and documentation of changes
- Provisions addressing cost and schedule impacts
- Authority levels for decision-makers on both sides
- Dispute resolution mechanisms if agreement on a change order cannot be reached
The Ontario Construction Act does not directly govern how change orders should be handled, but it does recognize contractual rights and obligations relating to construction work and payment. Failure to follow the procedures outlined in the contract can affect a party’s ability to recover additional compensation or enforce lien rights.
Common Causes of Change Orders and Scope Creep
Several common scenarios contribute to the need for change orders or trigger scope creep:
- The owner requests design changes after construction has begun
- Site conditions differ materially from what was anticipated in the tender or contract
- Municipal or regulatory requirements shift during the course of the project
- Errors or omissions are discovered in the design documents
- Construction materials become unavailable, requiring substitution
- Unforeseen events such as inclement weather or supply chain delays necessitate workarounds
While some of these triggers are unavoidable, their consequences are more manageable when parties rely on well-drafted contract terms and follow a transparent, documented change process.
Legal Risks of Improperly-Documented Change Orders
Disputes over extra work, delays, or unpaid invoices are often rooted in a failure to document change orders properly. Contractors may proceed with additional work in good faith, only to find that the owner disputes the changes or refuses to pay the additional costs. Conversely, owners may be surprised by cost increases tied to undocumented or unauthorized changes.
Ontario courts typically look for written documentation and evidence of mutual agreement when resolving disputes about changed work. Contractors may struggle to prove entitlement to extra compensation without a signed change order or written directive. This is especially true where the original contract specifies that changes must be in writing to be enforceable.
In some cases, consider whether there was an implied contract based on conduct, or whether unjust enrichment occurred if one party benefited from extra work without paying for it. These legal doctrines are fact-dependent and more uncertain than straightforward contractual enforcement.
Best Practices to Avoid Scope Creep and Change Order Disputes
Construction stakeholders in Ontario can significantly reduce their exposure to change-related disputes by following a few best practices.
Seek Clarity in Contract Negotiations
Invest time during contract negotiation to clarify the scope of work and align expectations. Vague or overly broad work descriptions are a recipe for disputes. Detailed specifications, drawings, and schedules help establish a shared understanding of project deliverables.
Strictly Enforce Change Order Protocols
Ensure all parties are enforcing change order procedures throughout the project. Even when changes appear minor or time-sensitive, parties should resist the temptation to proceed without written authorization. Digital tools or project management software can facilitate rapid documentation and approval workflows in fast-paced projects.
Communicate Throughout the Project
Maintain clear and consistent communication throughout the construction process. When issues arise, contractors should notify owners promptly and provide updated pricing or schedule impacts for approval. Owners, in turn, should avoid making verbal instructions or pressuring work to proceed without formal documentation.
Create a Detailed Dispute Resolution Clause
Include a dispute resolution clause in the contract that provides a framework for resolving disagreements over change orders without resorting immediately to litigation. Mediation, arbitration, or adjudication under the Construction Act may provide faster, less adversarial solutions.
Adjudication of Change Order Disputes Under the Construction Act
Since the introduction of Ontario’s prompt payment and adjudication regime under the amended Construction Act, parties now have a streamlined process to resolve certain disputes during construction, including disputes over change orders and payment for extra work.
Adjudication is designed to be fast, typically concluding within 30 to 60 days, and is binding on an interim basis. A party can initiate adjudication even while the project is ongoing, and doing so can help maintain cash flow and avoid escalation of disputes.
For adjudication to be effective, parties should ensure they have a clear paper trail documenting the change, its approval (or rejection), and the associated costs or impacts. Adjudicators will consider the contractual language and the parties’ conduct in deciding whether additional payment is warranted.
Legal advice is also essential for preparing or responding to adjudications under the Construction Act, which imposes fast timelines and requires organized and compelling submissions.
Scope Creep Claims and Legal Remedies
Despite best efforts, parties may end up in litigation over whether additional work performed falls within the contract’s original scope. In some cases, owners argue that the disputed work was already included, while contractors argue it was extra and billable. The strength of a contractor’s case often hinges on their ability to demonstrate that they communicated the change, followed the contract process, and sought approval before proceeding.
Delays caused by scope creep can also give rise to liquidated damages claims or counterclaims, mainly when the contract includes completion deadlines or penalties.
Consulting with an experienced construction lawyer is critical for determining whether informal changes are still enforceable, assessing the strength of available claims, and recommending appropriate dispute resolution mechanisms.
Change Is Inevitable; Risk Doesn’t Have to Be
Change orders and scope creep are an unavoidable reality of construction projects. However, the legal and financial risks they present are not. By adopting proactive contract management, enforcing documentation protocols, and seeking legal guidance when necessary, construction participants can protect their interests and maintain better control over project outcomes.
Contact Tierney Stauffer LLP for Comprehensive Construction Law Services in Ottawa, Cornwall, Kingston, and North Bay
Whether you are an owner, contractor, or consultant, understanding your legal obligations around project changes is essential. If you are involved in a construction dispute or need assistance drafting or reviewing your construction contracts, the talented construction lawyers of Tierney Stauffer LLP are here to help. We assist clients at all levels of the construction pyramid and create dynamic legal strategies to protect your interests and mitigate risk. To discuss your construction matter with our team, please contact us online or call 1-888-799-8057.
