Navigating cardinal changes to a construction contract

What do you do when the owner of a construction project requests a “cardinal change” within your scope of work? 

It happens all the time. You sign the construction contract. You begin work. Suddenly, the owner requests a major change affecting your scope of work. Whether you are the general contractor (GC) or a subcontractor (sub) on the project, major changes can present significant challenges and questions and may lead to critical problems down the road that were not foreseeable when you signed the contract, such as design issues, skilled labor force shortages and material supply issues and related costs. 

A “cardinal change” is a change that alters the contract itself and constitutes a breach of the contract. The difference between a cardinal change and a more typical change, which falls within the project scope, is extent: does the change so significantly alter the amount of work, type of work, or cost of the work that the parties agreed to that it changes the essential nature of the parties’ agreement? 

If the answer is yes, then you, as the GC or sub, have options.  

1. Refuse to perform the work: You do not have to perform the work. You may refuse to do the work and claim a breach of contract if you suffer damages as a result of the cardinal change. These damages may include lost profits on work that you would have performed and been paid for had the change not been made. This may be your best option if the change will cause you undue hardship and you have doubts that you will be adequately compensated. The biggest challenge to making this decision is being confident that the proposed change is a cardinal change and that a factfinder making this decision will agree with you. 

2. Submit a change order request: You could prepare a change order request for the work up front and insist that the GC or owner approve the request before beginning work. This is probably the most ideal option; however, the reality of construction projects — timing, cost estimating, keeping the GC or owner happy — does not always lend itself to making a change order request. You may end up spending time and resources preparing a change order request only to have it denied by the GC or owner and, from there, you are left with refusing to do the work or proceeding with the risks of the cardinal change. You can maximize the likelihood of your change order request being approved by backing up your request with as much information as is available to you, including additional material and labor costs and extensions of time that may be required to complete the work. 

3. Perform the work, then sue if necessary: You could also perform the work and then seek breach of contract damages after completing the work if the GC or owner refuses just compensation for the additional time and expense. The danger with choosing this option is that you have already incurred the additional expense and may expend significant legal fees attempting to recover a cost, or only a portion of the cost, you have already paid.  

Bottom line: it is critical to be well-informed when deciding how to approach a cardinal change. Begin with gathering all the information about the proposed change and then assessing whether the work can defensibly be classified as a “cardinal change.” Proceed with evaluating the risks and benefits of each option available to you, considering your available resources and the surrounding circumstances. The decision you make when faced with a cardinal change could be the difference between major profit and major loss on the project. 

Veronica L. Morrison is a member of the Litigation Department and the Real Estate Practice Group at Stevens & Lee, a full-service law firm with more than 185 attorneys. Based in Harrisburg, she assists commercial real estate owners and developers, general contractors, subcontractors and local governments with a range of construction, commercial, real estate and environmental litigation issues.