What are 'change orders' in contract management?

Change orders are critical components in contract management that refer to formal adjustments made to the original contract terms. They typically arise during the execution phase of a contract when certain conditions, requirements, or circumstances change that necessitate modifications to the scope of work, pricing, timelines, or other specific aspects of the initial agreement.

These adjustments ensure that both parties are aware of and agree to alterations, which helps maintain clarity and avoid disputes. For instance, in construction projects, a change order might be issued if unforeseen site conditions are discovered, requiring additional work. This process helps manage expectations and obligations moving forward, thus ensuring that the project can continue smoothly despite changes that might impact the original contract.

Understanding change orders is essential for effective contract management, as they play a fundamental role in adapting to evolving project needs while ensuring both parties remain aligned on their contractual obligations.