G.R. No. 156038; October 11, 2010
Spouses Victoriano Chung and Debbie Chung, Petitioners, vs. Ulanday Construction, Inc., Respondent.

FACTS

Petitioners contracted with respondent Ulanday Construction to build their house for a fixed price. The contract stipulated a 150-day period, progress payments to be made within seven days of an architect’s certificate, and that any change orders required the petitioners’ prior written approval. During construction, the petitioners delayed their payments for several progress billings. Concurrently, the respondent, allegedly upon the architect’s verbal instructions, executed 19 change orders without the required written approval from the petitioners, significantly increasing the project cost. The respondent eventually demanded payment for unpaid progress billings and these change orders. The petitioners refused, citing the respondent’s failure to complete on time and its violation of the change order provision.

ISSUE

The core issue was whether the respondent was entitled to payment for the change orders executed without the petitioners’ prior written consent as contractually required.

RULING

The Supreme Court ruled that the respondent could not recover payment for the unapproved change orders. The legal logic rests on the principle of contractual autonomy and the specific application of Article 1724 of the Civil Code. The contract explicitly required the owner’s written approval for any alteration. By proceeding without this written consent, the contractor assumed the risk of non-payment. Article 1724 states that changes in the work which increase the cost must be authorized in writing by the proprietor; otherwise, the contractor cannot recover the excess. The Court found this provision directly applicable. The architect’s alleged verbal instructions did not constitute the written approval mandated by both the contract and the law. The petitioners’ partial payment for two change orders, which they later acknowledged in writing, constituted a ratification only of those specific orders, not a waiver of the written approval requirement for all others. Consequently, the respondent’s claim for the bulk of the change orders was unfounded. The Court affirmed that parties are bound by the terms of their agreement, and a contractor who voluntarily deviates from stipulated procedures does so at its own peril regarding compensation for the unauthorized changes.