Click here to go to the home page of

Click here to get your free gift if you haven't already

Header Image for

Issue #8 - June 3 2013


Welcome to the eighth issue of the newsletter!

In today's main essay I have a true story about a direct contractor who refused to pay his sub $98,000 in signed change orders, and got away with it!

Also in today's issue...

The Check it Out! section is extremely time-sensitive, only one day left to take advantage of this excellent free offer so please read it quick.

My Quick Tip for today has a suggestion for how to make sure that the contract you're signing is based on the same revision of plans that you used for your bid (don't follow this tip and you could end up doing a whole bunch of extra work for free!).

I hope you enjoy this issue of


"Everybody in your situation has the same choice: you can rue your situation or you can dedicate yourself to changing it."
~  Mark Ford

General/Direct Contractor Refused To Pay $98,000 Worth Of Signed & Approved Change Orders -
And Got Away With It!

By Diane Dennis

This article is about a small "mom and pop" subcontractor and a "big fish" direct contractor, and the fact that the direct contractor refused to pay signed and approved change orders - and got away with it.

A signed contractor change order form is a necessity prior to performing any extra work. But even having the signed change order form doesn't guarantee you'll be paid on the changes.

Although this situation took place on a public works project (a community college) it can happen on private works as well.

Likewise although it took place between a general contractor (now known as a Direct Contractor/DC/Direct) and its subcontractor it can just as easily happen between a property owner and a direct contractor.

1998 In California ... A Community College Project

The T-Bar contractor was getting the job done at the "fast-track" pace that his customer the direct contractor wanted, which involved a lot of overtime for the many employees he had hired specifically for the project.

Whenever he came across something that needed a change order he'd personally get it signed by the superintendent that worked for the general contractor.

The subcontracting company submitted its bills monthly, including the change orders; the direct contractor paid the bills - less the change order amounts.

So there were notes made through the project on the waiver/release forms that the change orders still needed to be paid and would be once the college paid the direct.

When the sub was done he had $98,000 in change orders.

The main cause of the change orders was that the architects missed a lot of stuff 'out of sight' that affected the project. If the architects hadn't missed these things, the initial bid would have been higher possibly eliminating the need for all, or at least some, of the change orders.

The sub presented his final billing, again including the change orders, to the direct. When the payment came it didn't include the change orders.

The sub contacted the direct and asked when he could expect payment on the change orders.

He Refused To Pay The Change Orders

The direct point-blank refused to pay the change orders.


The sub informed the direct that the change orders were signed and if the direct didn't pay them then the sub would exercise his rights on the project.

The direct again told him that he refused to pay the change orders.

The sub went into a panic. He had to pay the payroll company as well as his supplier but he had no money since the direct was refusing to pay the change orders.

Time To Contact The Owner (the college)

The sub contacted the college, which in turn contacted the architect and then the college informed the sub that they were siding with the direct - they weren't paying the change orders either.

Well of course they're going to go that route because they just got $98,000+ of free work done on their campus!

Back To The Direct Contractor

When the sub asked the direct why he refused to pay the change orders the direct said that although the change orders were signed, they weren’t signed by someone allowed to contract on behalf of the direct.

The sub responded that they were signed by the direct's super on the job. The direct responded that nowhere in the contract did it allow for the super to contract on behalf of the direct, which meant the super’s signatures on the change orders weren't necessarily binding on the direct contractor’s company.

And he was correct; nowhere in the contract did it specifically state that the superintendent had the legal right to contract for the direct.

When the sub threatened to sue, the direct's response was that he had bigger pockets than the sub and that he’d hang on and drag it out until the sub ran out of money, which is exactly what he did.

The Subcontractor Loses - No Payment On The Change Orders

$30,000+ into the attorney the deadline (by California law - check with the law in your state to find out what the deadlines are) to file a lawsuit or drop it came about. The lawsuit would cost another five figures and the sub didn't have it so he had to give up.

Plus even though the direct refused to pay the change orders to the sub, the sub still had to pay the suppliers, material and labor, because he was contracted with the direct to keep the project clear of liens.

His suppliers were very supportive of the sub and allowed him to make, affordable to him, payments until everything was paid off (maintaining a good reputation with your suppliers and labor providers can be very important to your success).

They almost lost their home and everything they had but they managed to get the debt paid off (although they are still suffering the effects of it even this many years later).

The Hard Lessons Learned

Three main things the “mom and pop” learned through this nightmare:

  • Never accept a change order from someone who isn't listed in the contract as being legally allowed to contract for the customer
  • Always do a walk-through on the project before submitting the bid
  • The CSLB is not there to protect the contractor - they are there strictly to protect the consumer (when contacted they had no interest in helping out with the situation)

As I heard it, the direct did the same thing to several other subs on the project - the elevator guys, the electricians, the plumbers; it was said later that the guy has a reputation of being a "sub-buster".

No kidding!

Bottom line: NEVER accept a signature on a change order form from anyone who is not listed in the contract as being allowed to legally contract for the customer. If your customer has a problem with that they can either sign the change order themselves or issue an addendum to the contract to list those who can sign the change orders. Hold your ground on it.

I hope that this article has helped you and if it has can I ask you to please help me out by entering your comments in the "What Did You Think" section. It's the only way for me to know if I'm publishing articles that you want to read. :)

This article, written by me Diane Dennis, is based on my personal experience. I was the "mom" half of the "mom and pop" subcontracting company. Other contractors often told me that I ought to write a book warning of all the nightmares we'd been through.

That's when I started my first website,, and then from there I built,, and now my newest site

Please keep in mind to contact an attorney in the state you do work in to find out what your options are:

Check It Out!

If you’ve ever sat at your desk feeling totally stuck and overwhelmed by the constant changes and tweaks on Facebook, then I have some good news for you!

My friend, the world’s leading Facebook expert, Mari Smith, is offering another of her signature power Facebook marketing webinars on June 4th.

It’s totally FREE and you’re invited to join in:

7 Steps to Facebook Success – free live webinar

Date: Tuesday, June 4, 2013 (that's TOMORROW!!)
Time: 10:00am Pacific | 12:00pm Central | 1:00pm Eastern | 6:00pm UK
Duration: 90 minutes
Go here to register:

Mari has created a 7-step Facebook Marketing Success Plan, packed with proven, money-making tips for you to turn the world’s most popular social network into the TOP source of quality leads and paying customers for your business!

After this 90-minute webinar, you’ll walk away with actionable steps that you can put in place right away.

This will be one awesome webinar! Go save your seat now:

Get ready to EXPLODE your Facebook business in the rest of 2013 and beyond!

And, by the way, if you are unable to join Mari live, she will be recording this live event and will send out the replay link to all registrants shortly after.

So even if you know that you won't be able to attend be sure to register NOW (remember the webinar is tomorrow Tuesday morning) so that you'll have access to that live recording ... but if at all possible I highly recommend that you join live as Mari tells me she is doing a live prize drawing, bonuses, and live Q&A!

Quick Tip

When putting together your bid for a project always make sure to include the plan date and revision number in your bid.

Also insist that the plan date and revision number used for the contract between you and your customer also has that information.

That way when you're awarded the contract you'll know right off the bat whether or not your bid and their contract are based on the same set of plans.

If you don't do this there's a good chance you'll be doing work, for free, that you didn't budget into the bid.

A few helps:

Updated Forms and Laws

Check out this website I've been partnered with for several years now for downloadable construction forms for all states:

Use and sign forms on your smartphones/tablets/mobile devices:

This is the section of our newsletter where I'll announce updated forms from our website as well as changes to laws. I'd love your help in keeping this section active so if you have any news please do email me and I'll include it here.

Look Who's Talking!
Send me your comments and see your name in lights! ;)

"Good Morning Diane,

Thank you so, so much for all the good information, I really do appreciate it!"

~ Sonia Sauseda

"I can't tell you enough how much I'm enjoying your new website!"

~ Laura Zeller - Zeller Electric Corporation

What Did You Think?

If you haven't yet, please let me know your thoughts on the main essay by posting your comments here.

Copyright © 1999 - 2013 MONK AND DBUG, LLC

NOTE: If URL's do not appear as live links in your e-mail program, please cut and paste the full URL into the location or address field of your browser.

Disclaimer: only recommends products that we've either personally checked out ourselves, or that come from people we know and trust. For doing so, we may receive a commission.

Nothing in this e-mail should be considered personalized advice, legal or otherwise. Although our employees may answer your general customer service questions, they are not licensed under laws to address your particular legal situation. No communication by our employees to you should be deemed as personalized advice.

For specific legal advice please visit:

Click here to go to the home page of

Click here to get your free gift if you haven't already