The cardinal change doctrine has become a popular doctrine for a contractor to argue under but remains an extremely difficult doctrine to support and prove. Arguing cardinal change is one thing. Proving cardinal change is entirely different. As shown below, this is a doctrine with its origins under federal government contract law with arguments extending outside of the federal government contract arena. For this reason, the cases referenced below are not federal government contract law cases, but are cases where the cardinal change doctrine has been argued (even though these cases cite to federal government contract law cases).
A party argues cardinal change to demonstrate that the other party (generally, the owner) materially breached the contract based on the cardinal change. In reality, a party argues cardinal change because they have cost overruns they are looking to recover and this doctrine may give them an argument to do so. But it is important to recognize the distinction between raising it as an argument and the expectation that this (difficult doctrine to prove) will carry the day.
The cardinal change doctrine is a doctrine that originated under federal governments contracts law–the doctrine developed based on drastic unilateral modifications of the contract from the federal government that were not contemplated by the contract’s changes clause. IES Commercial, Inc. v. Manhattan Torcon A Joint Venture, 2018 WL 4616029, *5 (D. Maryland, 2018). See also U.S. v. Peter R. Brown Construction, Inc., 674 Fed.Appx. 901, 909 (11th Cir. 2017) (explaining cardinal change doctrine has applied when a contractor is directed by the government to perform a scope “that fundamentally alters the contractual undertaking” such that it is “not comprehended by the normal Changes clause.”) (citation omitted).
The cardinal change doctrine applies “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.” Durr Mechanical Construction, Inc. v. PSEG Fossil, LLC, 2021 WL 303030, *2 (D.New Jersey 2021) (quotation and citations omitted). These are changes that “fundamentally alter the nature of a contract” and constitute a “drastic modification beyond the scope of the contract that altered the nature of the thing to be constructed.” Latex Construction Company v. Nexus Gas Transmission, LLC, 2020 WL 7386358, *8 (S.D.Texas 2020) (internal quotations and citations omitted). See also Amex Construction, Inc. v. Clark County, 2020 WL 3488736, *6 (D.Nevada 2020) (“A cardinal change must drastically alter the work agreed to such an extent that the contractor effectively performs duties that are materially different from those for which the contractor originally bargained.”) (internal quotation and citation omitted).
Noteworthy, out of sequence work, delays, and even increased costs do not amount to a cardinal change. Ames Construction, supra.
Just because the cardinal change doctrine applies to federal government contract law does not mean it universally applies to state law. For instance, in Durr Mechanical, the court refused to apply the cardinal change doctrine because it had not been adopted by New Jersey law. Durr Mechanical, supra, at *5 (“I find no compelling reason to recognize a cardinal change doctrine claim under New Jersey law, and decline to do so.”). On the other hand, in Latex Construction Company, the court found that while the plaintiff faces significant hurdles in proving a cardinal change, the doctrine applied to private construction contracts. Latex Construction Company, supra, at *8.
When arguing cardinal change, outside of the federal government contract arena, please remember that there may be an argument that the doctrine does not apply to the state law claims. And, even if there is an argument that the cardinal change doctrine does apply, keep in mind that the origin of the doctrine and its historical context will apply. The change should apply to a drastic change/modification (unilateral modification) that fundamentally alters the contract because it is so materially different than what was bargained for–this is difficult to prove!
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.