Changes occur constantly on a construction site, whether they are inadvertently caused by the weather, the negligence of another trade, or directly caused by the General Contractor, Owner and/or Architect via a construction change directive (CCD). All too often, these changes may lead to delays in meeting deadlines, resulting in unanticipated expenses, wherein the question always becomes, who bears the burden of the additional costs? Additionally, how does a contractor avoid enduring (and sometimes absorbing) these additional costs where there is a “no damages for delay clause” in the contract? The key is to have an understanding of what can occur during a construction project and ensuring your contract provides you and your company the ultimate amount of protection with the understanding that sometimes total protection is not possible and a certain amount of risk must go into the venture.
A CCD is a written order directing change in the agreed upon work, consisting of possible additions, deletions and/or revisions, and is issued prior to the agreement on cost adjustment, if any, in the contract sum.[1] The Contractor, upon receipt of the CCD, “shall promptly proceed with the change in the Work involved” and notify the Architect of any issues it has with the CCD, whether it be the additional payment, or lack thereof.[2] Where prices are in dispute, the Contractor should, while proceeding with the directives of the CCD, reserve its right to make a claim for payment to the General Contractor, Architect and/or Owner, by submitting a written statement that it is proceeding under protest.
However, there is a limit to the scope and use of a CCD, and it is found under the Cardinal Change Doctrine. New York case law has defined a cardinal change as “an increase in scope and changes so great as to constitute … an abandonment of the original contract,” wherein the disputing Contractor would be entitled to recover the costs expended and incurred in connection with the performance of the out of scope work.[3] A cardinal change alters the “very essence of the contract.”[4] However, the Contractor should uses its discretion when alleging that a cardinal change has occurred, as the ultimate determination is up to the reviewing court. The end result in a determination of a cardinal change is that either the issuer of the CCD is found to be in breach of contract or the Contractor was incorrect in its allegation and, therefore, is itself in breach of contract.
For more about CCDs and the subsequent challenges of proving the occurrence of a cardinal change, contact our firm at (631) 752-7100.
[1] AIA A201-2007, §7.3.
[2] AIA A201-2007 §7.6.6.
[3] Bovis Lend Lease LMB Inc. v. GT Venture, Inc., 285 A.D.2d 68, 71 (1st Dep’t. 2001).
[4] Costanza Const. Corp. v. City of Rochester, 147 A.D.2d 929 (4th Dep’t. 1989).