Contractors and the Rare "Cardinal Change"
A cardinal change has nothing to do with the football team, the baseball team or, for that matter, the bird. Rather, it is a legal concept that is important for contractors to understand.
Where applicable, the cardinal change doctrine puts
limits on the amount of changed work or extra work that can be ordered under the
changes clause of a construction contract. I recently dealt with the doctrine in
connection with a client matter; here are the basics.
Cardinal Changes Defined
To begin with, the terms cardinal change and cardinal
change doctrine arise out of federal contracting law. Federal courts have
defined cardinal changes as alteration[s] in the work so drastic that they
effectively require ... contractor[s] to perform duties materially different from
those originally bargained for. Centex Constr. v. Acstar Ins. Co., 448 F. Supp.
2d 697 (E.D. Va. 2006). More simply put, they are substantial deviation[s] that
change the nature of the bargain. ThermoCor, Inc. v. U.S., 35 Fed. Cl. 480, 40
Cont. Cas. Fed. (CCH) ¶ 76955 (1996). These deviations may consist of a single
significant change outside the general scope of the contract or the cumulative
effect of multiple changes, none of which alone would be cardinal.
The Effect of Cardinal Changes
Under the cardinal change doctrine, changes deemed
cardinal on federal projects constitute material breaches of the contract.
Generally speaking, the consequences of these breaches are, among other things,
the contractor may pursue common-law
termination and damage remedies;
the contractor is protected against
abandonment of the contract; and
the procedural and damage limitations of the
contract are inapplicable. (Philip L. Bruner & Patrick J. OConnor, Jr., Bruner & OConnor on Construction Law § 4:13)
The cardinal change doctrine is a byproduct of the
unilateral changes clause found in federal construction contracts. The clause
(which is conceptually similar to typical changes clauses) requires contractors
to perform all directed changes within the general scope of the contract,
whether an equitable adjustment to the contract price is agreed upon or must
be administratively determined. The cardinal change doctrine provides protection
to contractors insofar as it limits the amount of changed work that can be
ordered under the changes clause.
Arizona Construction Contracts
Arizona courts have not directly addressed the cardinal
change doctrine. There are, however, indications that Arizona courts may enforce
the doctrine with respect to public construction contracts.
First, like other state courts, the Arizona Supreme
Court has used a separate legal theory to address this issue. Specifically, the
Court relied on the concept of quantum meruit in Greenlee County v. Webster, 25
Ariz. 183 , 215 P. 161 (1932). Quantum meruit is the measure of damages imposed
when a party prevails on the equitable claim of unjust enrichment i.e., the
party renders goods and services in the absence of an unenforceable contract
that unjustly enrich the recipient. W. Corr. Grp., Inc. v. Tierney, 208 Ariz.
583, 590, 96 P.3d 1070 (App. 2004). Recovery under quantum meruit (which
literally means as much as he deserves) is based on the value of goods and
services rendered. Landi v. Arkules, 172 Ariz. 126, 135, 835 P.2d 458, 467 (App.
In Greenlee County v. Webster, the Arizona Supreme Court
was tasked with determining whether material and substantial changes to a
highway construction project fell within the changes clause of the subject
contract. In doing so, the Court noted that:
Changes that radically extend the amount of work, or
that eliminate large portions of the work, or that greatly increase the cost
thereof, are usually not included within the provision allowing alterations or
modifications of the plans or specifications. Generally speaking, only such
alterations as are incident to and in aid of the main contract are thought to be
covered by these provisions. (Greenlee County, 25 Ariz. at 191-92)
The Court ultimately held that the changes at issue in
Greenlee County were outside the scope of the subject contract, and that the
contractor might have refused to [perform the changes] without violating any
obligation of [its] contract. Id. at 194. But, given that the changed work was
already performed, the Court found that the contractors proper cause of action
was quantum meruit (not breach of contract as the contractor had pled). Id. at
Second, and in addition to the holding in Greenlee
County, the Arizona Supreme Court has noted that, in the absence of controlling
state authority, it will look to federal contracting law for guidance in
connection with public construction contracts. New Pueblo Constructors, Inc. v.
State, 144 Ariz. 95, 101, 696 P.2d 185, 191 (1985). Thus, if an Arizona court
directly addresses the cardinal change doctrine in the context of a public
contract, the federal authority establishing the doctrine will likely be
considered in the courts decision.
Despite the holdings in Greenlee County and New Pueblo,
Arizona courts have not adopted the cardinal change doctrine. Accordingly,
Arizona contractors presented with what they believe to be a cardinal change
should consult with their attorney to fully understand their rights and