3.3 Addenda, Change Orders, Allowances, Schedules, Warranties, Financing & Breach

Addenda vs. Change Orders

Michigan's rule for both is simple. R 338.1533(1) requires all agreements and changes to agreements to be in writing and signed by the parties, with copies to the customer. There is a second reason to put every change in writing: under MCL 570.1114, a contractor has a construction lien on a residential structure only if the contract and any amendments or additions are in writing. Unwritten extras are therefore outside lien protection.

A Good Change Order

1. References the original contract and date.
2. Describes the added or deleted work with specifications, such as "Replace 12 sheets of 7/16-inch OSB on the south slope."
3. States the price change and the new contract total.
4. States any change in completion date.
5. Is signed and dated by the owner and an authorized representative of the licensee before the extra work proceeds whenever possible.

When Hidden Damage Appears Mid-Tear-Off

The deck is open, and rain is forecast. The safe practice is to put the unit price for decking in the original contract. Then get a written, signed change order for the quantity, which can be signed electronically on a phone. That meets R 338.1533 and keeps lien rights. If the contractor installs $1,200 of decking on a verbal OK and the owner refuses to pay, the contractor has violated the rule. The contractor also has no lien for that amount and faces a harder collection case.

Allowances

An allowance is a budget in the contract for an item the owner has not yet chosen, such as "skylight allowance $900, installed." When the owner chooses:

• If the actual cost exceeds the allowance, the owner owes the difference, plus any markup the contract allows.
• If the actual cost is less, the owner receives a credit.

Example: The contract includes a $2,400 allowance for designer shingles. The owner picks a line that costs $3,150 for the same area. The contract price increases by $750, documented in a signed change order. Clear allowances prevent "you said it was included" disputes.

Factors That Affect the Completion Date

The PSI salesperson outline asks candidates to "adjust the contract for factors affecting completion date." Typical causes include:

• Weather: rain, high wind, or cold that keeps self-adhering products from bonding.
• Material lead times and back-orders.
• Owner changes and late selections.
• Concealed conditions requiring engineering, such as a cracked truss.
• Permits and inspections, including waiting for a building official.
• Other trades, such as chimney repair or electrical work that must happen before the roof.

A clause that extends time for these events, and requires written notice, protects both parties. Liquidated damages for delay, if used, must be a reasonable pre-estimate.

Warranties

Good practice includes stating exactly what is covered and excluded, such as storm damage, ice dams from inadequate attic insulation, and owner modifications. State the duration and whether the warranty transfers to a later owner. Register manufacturer warranties on time, and give the owner copies. Remember that Michigan disciplines workmanship not meeting the Michigan Residential Code regardless of warranty language (MCL 339.2411(2)(m)).

Financing Options

The PSI outline asks candidates to "explain financing options." Common sources for roofing work:

• Cash or savings, paid on a progress schedule. LARA advises homeowners never to pay for the entire job in advance.
• Home equity loans or lines of credit. If a lender takes a security interest in the principal dwelling, federal Truth in Lending rules generally allow 3 business days to rescind.
• Construction or renovation loans, paid out in draws after inspection, often through a title company that collects sworn statements and lien waivers (Section 5.3).
• Insurance claim proceeds. Checks are often payable jointly to the homeowner and the mortgage lender, and the lender may release funds in stages.
• Contractor-arranged or manufacturer-arranged financing. Disclose the full agreement, including any finance charge (MCL 339.2411(2)(h)).

Breach of Contract and Remedies

A breach is failure to perform as promised without legal excuse.

• Material breach: The failure goes to the heart of the contract, such as walking off the job or refusing to pay a large progress payment when due. The injured party may stop performing, terminate, and recover damages.
• Minor (partial) breach: Performance is substantial, but a detail was missed, such as the wrong color of drip edge. The injured party must still perform but can recover damages or the cost of correction.
• Anticipatory repudiation: A party announces in advance that it will not perform.
• Substantial performance: A contractor who substantially completes may recover the contract price minus the cost to correct or finish.

Remedies include compensatory damages (the cost to complete or correct), consequential damages (foreseeable losses, such as interior water damage from a known open roof), liquidated damages if agreed, rescission (undoing the contract), and rarely specific performance. The injured party has a duty to mitigate, meaning it must take reasonable steps to limit its losses, such as tarping an exposed deck.

For licensees, abandoning a project without legal excuse is also a disciplinary ground (MCL 339.2411(2)(a)), separate from any civil damages.