Authority of Owner’s Agent With Respect to Contract Modifications

Owners do not always oversee every aspect of the construction process and oftentimes employ agents to represent their interests at the construction site. Commonly, the architect or construction manager will serve in the role of “agent” to the owner. A question of the agent’s authority will frequently arise when a dispute surfaces concerning modifications to the construction contract. To answer the question, courts will examine whether the agent was given express, implied, or apparent authority to act in such a capacity.

Courts may utilize the concept of estoppel when a contractor or other entity associated with the construction has changed his position based on the reasonable belief that the agent was, in fact, acting on behalf of the owner. When the owner holds the agent out as such, he clothes the agent with apparent authority. This authority is similar to the concept of estoppel, although with apparent authority the contractor does not need to show that he changed his position in reliance on the owner’s representative actions. Under implied authority, authority for the agent’s acts is gleaned from the custom in the industry or by the owner’s actions that declare his intention to authorize the agent’s actions.

On some occasions, the agent is authorized via a power of attorney to enter into a contract on the owner’s behalf and to act on behalf of the owner in all aspects of the construction. In such instances, it has been held that the agent also has authority to modify the contract. Absent such express authority, it is generally the case that a contractor who performs based on an agent’s oral requests for modifications or extras will be denied recovery if the construction contract calls for written authorization. Courts have held that the agent simply does not have the authority to alter or waive a contractual provision or enter into a collateral contract for extra work.

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