Changes are an unavoidable aspect of construction. Although thorough effort and coordination are required in preparing the original project contract, specifications and construction drawings, there will still be changes. This is why owners are provided the right to make changes to the work under a typical contract changes clause.
However, the ability for owner requested changes, even if provided in the contract, are not without limitations, restrictions and consequences. After all, what purpose would any of the project documents, contracts and drawings serve if they were subject to constant change? What good would the contract serve if the owner could make any change(s) without consequence?
The reign of the owner to make changes provided for under a typical contract changes provision is limited by the general scope of work provided for in the construction contract. The limit of changes available to the owner is the main purpose for which the contract was created. For example, should an owner enter into a construction contract with a contractor for the construction of a proposed ice rink, with an accessory snack bar, a change seeking to remove the construction of the ice rink from the contract would violate the purpose of the original contract. On the other hand, should the owner decide to go ahead with the construction of the ice rink without the snack bar, the original purpose in constructing an ice rink would not be violated, and that would be a permissible change.
A “Cardinal Change” is one where the purpose of the original agreement has been frustrated or made impossible by the extent of the requested change. Cardinal changes amount to the contractor’s agreement being breached by the owner.
“The test to be applied is whether the supplemental work [or change] ordered so varied from the original plan, was of such importance, or so altered the essential identity or main purpose of the contract that it constitutes a new undertaking.” Indeed, under New York construction law, it is the impact on the original purpose of the construction contract of the proposed addition or omission, not the size of the change, which is the court’s consideration in determining a cardinal change. This is an issue which will vary from project to project as the underlying facts and purposes of construction will vary from project to project. New York courts have found in some settings changes of +/- 40% or more may be an allowable change, where others seeking changes of 2% have been found to be cardinal changes, allowing the contractor to potential damages for breach of contract.
In the private construction context, the contractor may accept cardinal changes and proceed to perform its revised duties, which would result in the creation of a new agreement. The contractor may also be entitled to consider a proposed cardinal change as an abandonment of the original agreement by the project owner, and recover damages for the value of its work in excess of the contract value.
In the public construction context however, the contractor runs the risk of non-payment for work if it accepts a cardinal change. Although a public owner may make changes within the existing scope of work, without complying with competitive bidding statutes, it cannot make a new or different contract. Further, simply performing work ‘under protest’ may not be sufficient to preserve the contractor’s right to compensation.
When faced with a potential cardinal change or a deductive change order it is wise to seek legal advice as the contractor may waive their right to compensation and right to its lost profits, among other possible remedies under New York Construction Law.
Your comments and article topic suggestions are invited in the field below.
John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608-1346.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter. No reader, user, or browser of this site should act or refrain from acting on the basis of information on this site without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client relationship between the reader, user, or browser and website authors, contributors, contributing law firms, or committee members and their respective employers.
1 thought on “Changes vs Cardinal Changes: The Limit of Construction Contract”
What does a customer do when a Painter/ Contractor refuses to give you a Proposal/Estimate before they start the job & never provide ANY Receipts & then they (Gil Graham of Sarasota, FL) leaves the house unfinished & a mess, steals our $200 Adjustable Ladder & steals the money $14,500 that you gave this Con Man for materials & future work. We had to hire a new painter to re-paint the whole house over $4,000.