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The Cardinal Change Doctrine An Overview For Owners, Contractors And Subs

Friday, May 04, 2007 12:05 pm

The Cardinal Change Doctrine -- An Overview For Owners, Contractors And Subs

Construction contracts typically spell out how the parties will handle changes and change orders. Sometimes, however, changes go so far beyond the contract that one party -- the one looking to be paid -- will argue that the changes were cardinal changes. This article examines the cardinal change doctrine, its relationship to the concept of contract abandonment and the evidence needed to prove and defeat cardinal change claims.

Cardinal Change Doctrine's Purpose The cardinal change doctrine originated in federal contract law. "As developed by the federal courts, this doctrine protects a government contractor from being subject to 'duties materially different from those originally bargained for.'"Claude Dubois Excavating, Inc. v. Town of Kittery, 634 A. 2d 1299 (Me. 1993), quoting General Dynamics Corp. v. U.S., 218 Ct. Cl. 40 (1978). According to an Ohio federal district court, the cardinal change doctrine "provides an extracontractual remedy to a contractor where changes ordered by the owner are so significant that they cannot be said to fall within the 'changes clause' contained in the contract." Ebenisterie Beaubois Ltee v. Marous Bros. Const., Inc., 2002 U.S. Dist. Lexis 26623 (N.D. Ohio 2002).

Over time, courts have applied the doctrine to private and state and local government construction contracts. One court even identified a trend toward using the doctrine in private contracts (see Ebenisterie Beaubois Ltee).

Cardinal Change Versus Abandonment "Under established case law, a cardinal change is a breach. It occurs when the government effects an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for. By definition, then, a cardinal change is so profound that it is not redressable under the contract, and thus renders the government in breach."Allied Materials & Equipment Co., Inc. v. U.S., 215 Ct. Cl. 406 (1978). Contractual change provisions do not authorize cardinal changes. Air-A-Plane Corp. v. U.S., 197 Ct. Cl. 269 (1969).

Contract abandonment occurs when both parties to the agreement mutually agree to depart from its terms. Their agreement may be express -- i.e., written down -- or implied from the parties' conduct. "Contract abandonment has been recognized 'where there have been so many substantial changes to the contract that it can no longer be used to determine the value of the work done,"the Supreme Court of Nevada explained in J.A. Jones Const. Co. v. Lehrer McGovern Bovis, Inc., 89 P. 3d 1009 (Nev. 2004), quoting Rudd v. Anderson, 285 N.E. 2d 836, 840 (Ind. Ct. App. 1972)).

The two concepts -- contract abandonment and cardinal change -- are so similar that most courts use them interchangeably, with the exception of California. In Amelco Electric v. City of Thousand Oaks, 27 Cal. 4th 228 (2002), the Supreme Court of California refused to decide whether the cardinal change theory applied in the state. Instead, the court ruled contract abandonment is "fundamentally different"from a cardinal change to a contract.

One commentator summed up the court's distinction as follows: Abandonment entitles the contractor "to recover its total cost (less payments received) for work both before and after the contract was abandoned."A cardinal change entitles the contractor "to breach of contract damages for the additional work constituting a cardinal change"(Aaron Silberman, "Abandonment and Cardinal Change on State and Local Construction Projects,"The Procurement Lawyer (Spring 2004)).

Cardinal Changes There is no single definition owners, contractors and others can use to determine if, in any given situation, a cardinal change occurred. Instead, courts look at the facts of each case and base their decisions on the particular facts.

Some courts focus on the nature and exten [...]

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