A YACHT NAMED CHANGE ORDER: CALIFORNIA’S PRIVATE WORKS CHANGE ORDER FAIR PAYMENT ACT

Written by Theodore L. Senet, Esq.^*

INTRODUCTION

There is a photograph on the Internet of a large yacht with the name "Change Order" painted across the stern. The yacht is towing a small dinghy with the name "Original Contract" on its side. While humorous, the photograph is a cynical meme conveying the message that some contractors make extraordinary profits on change orders. In fact, contractors often do not like disruptive or excessive change orders as they can delay a project, and lead to disputes with owners and subcontractors. Further, when an owner delays paying for changes, there can be unjust hardship on contractors and subcontractors who cannot afford delays in payment due to extended change order negotiations. Disputes over changes can impede progress payments, damage morale, and cripple the progress of a project.

To ensure timely payment of change orders, California launched The Private Works Change Order Fair Payment Act, which is intended to keep struggling contractors afloat, but which may also unleash a torrent of construction claims and disputes.⁰¹ For all commercial, mixed use, mid-rise, and high-rise residential construction contracts entered into after January 1, 2026, California Civil Code section 8850 imposes new construction claim procedures, prompt payment penalties on owners, and expanded liabilities related to payment disputes. While the new statute is intended to "promote economic stability" and "ensure efficient project completion," it may have the opposite effect by incentivizing claims and litigation.⁰² This article will analyze the changes in the law and explore potential impacts on the construction industry.