THE LAW AND CIVIL ENGINEERING – SEPTEMBER 2017 NEWSLETTER
The Engineer Must Know if The City Agent Authorizing Extra Work Has The Authority to Do So
by Eugene Bass
An engineer had a contract to provide consulting services to a charter city. The contract required that any modifications to the agreement were only to be made by mutual written consent of the parties. The contract work was completed, billed and paid for. Ten months after completion of the project, the engineer submitted a final invoice for a substantial additional sum, which the city refused to pay because it was beyond the maximum contract price and included work that was not authorized by the contract. The engineer sued the city for breach of contract and common counts. He admitted he did not follow the contract’s written modification requirement, but argued the contract was orally modified to include extra work based on requests by the city’s associate engineer and an outside consultant.
The contract set forth very specific requirements as to extra work amounts and procedures for authorization and payment. The city asserted that the engineer was not entitled to be paid for the extra work because he did not seek to renegotiate or amend the contract or request authorization for the special work at any time prior to submitting his final invoice.
The dispute was tried before a judge and a decision for the city was rendered, denying the engineer any pay for the extra work performed at the request of the assistant city engineer and project manager. The case was appealed and the appellate court upheld the trial court’s decision, denying any recovery to the engineer.
In reaching it’s decision, the appellate court noted that that the city’s charter contained the specific provisions regarding contracts and that there was no provision for payment based upon the legal theories that did not comply with the charter.
The appellate court disagreed with the engineer’s contention that he was entitled to be paid for the extra work he performed because an associate engineer employed by the city and an outside consultant hired by the city to oversee the project requested that he perform the work. He contended that the request to do extra work amounted to a modification of the contract.
The court stated that a charter city may not act in conflict with its charter and that any act that is violative of or not in compliance with the charter is void. It held that the mode of contracting, as prescribed by the municipal charter, is the measure of the power of the city to contract and a contract made in disregard of the prescribed mode was unenforceable. The court also stated that persons dealing with a public agency are presumed to know the law with respect to any agency’s authority to contract. Further, it stated that one who deals with an employee or agent for a public entity is presumed to have full knowledge of that employee or agent’s powers, and stands the risk that the entity will no liability for the agent’s acts outside the scope of it’s express authority. The court also stated that since there was no provision in the city charter for execution of oral contracts by employees of the city who do not have requisite authority, the alleged oral statements by the associate city engineer and project manager are insufficient to bind the city. No government, whether state or local, can be bound to any extent by an officer’s acts in excess of his authority. A contract that does not conform to the prescribed method for entering into municipal contracts is void and no implied liability can arise for benefits received by the city.
While the appellate court expressed sympathy for the seeming unfairness of denying payment for work done in good faith by one who has no actual knowledge of the restrictions applicable to municipal contracts it still held that one dealing with the city is bound to see that the city charter is complied with and if the charter forbids the contract which he has made, he knows it, or ought to know it, before he places his money or services at hazard. The court also noted that in this case the engineer was not the victim of an innocent mistake in that he admitted that, at the time he performed the extra work, he knew it was outside the scope of the contract. Moreover, that he had actual knowledge of the process for obtaining authorization for extra work.
The case is important because it makes clear that that the engineer dealing with a public entity must be aware of the distinction between public and private contracts and that the legal theories for recovery that apply to private projects will not necessarily apply to public entities. Public entities are bound by their governing documents limiting the power of city officials to contract for the city. The case also serves to demonstrate the importance that city employees be aware of the limitations of their authority to bind the city. In this case, the consultant was not paid for work performed upon the request of the assistant city engineer and project manager who did not have the authority to request the work on behalf of the city.