One change too many

Is there any position for the American concepts of “Cardinal Changes” and “the cumulative
impact doctrine” in English Law? 1

Lewis Cohen and Jonathan Miller2

Introduction
Almost without exception every form of construction contract allows for variations. English case
law3 has dealt with this subject in great detail, as can be seen from the lengthy chapters on this area in
the latest editions of Keating on Building Contracts and Hudson’s Building and Engineering
Contracts. The need for variations is self-evident. There will always be some form of change in a
building contract for a variety of reasons; a change of design by the Employer and the need to
accommodate unforeseen ground conditions are two of the more obvious examples.

This paper looks at a specific point where the American legal system has developed beyond English
contract law and analyses whether the advances made in American Law can be implied into English
contract law. The development in question concerns the effect of a series of changes to any given
contract with the result that the contract becomes fundamentally different from that which the parties
had initially entered into. This development is contained within the two American concepts of
“Cardinal Changes” and the “cumulative impact” doctrine.

These two concepts allow a contractor to establish that a series of variations can combine to form a
breach of contract so significant that it results in a termination of the contract. This is something
which on first consideration has no place in English Law. This paper will consider whether there is
room for either concept in English Law and if not how this issue is dealt with.

The American Position

The following definition of Cardinal Changes is taken from a 1978 case and is as follows:
“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,
cardinal change is so profound that it is not redressable under the contract, and thus
renders the government in breach.”4

The doctrine started as a principle of United States Federal Law, developed by the caselaw of the
United States Court of Claims. It was a doctrine developed for a practical purpose:

1
This paper was first published in Construction Law Journal Vol. 18 No. 5 in 2002
2
Lewis Cohen is a solicitor in the practice of Speechly Bircham and Jonathan Miller is a barrister in the chambers of Desmond de Silva QC
(1 Essex Court)
3
References to “English Law” are shorthand for the Law of England and Wales but not Scotland and Northern Ireland.
4
Allied Materials & Equip. Co v United States 569 F.2d 562.
 (a) US government contracts invariably contain a standard dispute clause providing for a
determination of disputes arising under the contract by an administrative procedure.
In normal circumstances, that administrative determination can then only be
challenged by way of judicial review. The usual criteria for such review (fraud,
capriciousness, gross error, absence of evidence, mistake of law) are not very
different in the United States from those which would apply in England and Wales.
(b) The cardinal change doctrine enabled government contractors to by-pass the
administrative determination-judicial review route and go to a Federal Court for trial
on a claim for damages (either before, after or instead of the administrative dispute
resolution provided for in the contract).
(c) A further utility of the doctrine became apparent after US government contracts
began to include standard “termination for convenience” clauses, which have the
effect of excluding government liability for loss of profit by limiting recovery after
repudiatory breach to a quantum meruit for work done (that is very much a summary
of a complex area). In such circumstances, a contractor could recover loss of profits if
it could bring itself within the cardinal change doctrine.

Although the doctrine evolved as a practical response to the specific provisions of US government
contracts, there does not seem to be any conceptual reason why it should not be of more general
application. Indeed from discussions with American Lawyers it seems there is anecdotal evidence that
the doctrine of Cardinal Changes is no longer exclusively applied to cases where it is the US
government effecting the alteration and the concept may be applied to construction contracts that do
not have a governmental body as a party. There are obvious attractions for use of the doctrine in any
situation where a party seeks to avoid an unwanted and inconvenient dispute resolution clause, or an
unwanted and inconvenient limitation on recovery under the contract.

Although the doctrine of Cardinal Changes may not be relevant to any discussion concerning English
Law in its own right, it is needed to assist in understanding the second and potentially more relevant
doctrine known as the “cumulative impact” doctrine. This doctrine is not as clearly defined as the
doctrine of “Cardinal Changes” but in effect the basic idea of the doctrine is as follows:
“The basic idea of this doctrine is that the cumulative impact arising from not one, but many
changes occurring throughout the change order process in combination results in an
adverse effect on the construction process and unforeseeable costs. The doctrine,
unfortunately, is not well defined by the American courts and tribunals, and some American
courts and tribunals have held that to prevail with a cumulative impact claim, the claimant
must demonstrate cumulative impact rising to the level of a cardinal change. Thus, while the
two doctrines may be related, they are not necessarily indistinguishable.”5

The “cumulative impact” doctrine appears to have its origins in decisions of the US Court of Claims
which emphasised that the issue of a cardinal change was a question of fact and that
“Each case must be analysed on its own facts and in light of its own circumstances, giving
just consideration to the magnitude and quality of the changes ordered and their cumulative
effect upon the project as a whole.”6

5
This definition has been suggested in correspondence between one of the authors of this paper and a US Construction Lawyer.
6
Wunderlich Contracting Co v United States 351 F.2d 956 (a965) at p 966
An example of the potential cumulative impact of many changes, each justifiable under the contract,
can be found in the case of Air-A-Plane Corporation v the United States (408 F.2d 1030 (1969),
which dealt with the important matter of smoke generators. Air-A-Plane had entered into a fixed price
contract with the US Army Chemical Corps to make smoke generators to a detailed specification. The
contract had a “Changes” provision reserving the right to the Government to order changes.

In fact, after the contract was signed over 1000 changes were made, with the effect (it was said) that
production was disrupted and the contract took on the aspects of a design or development contract
rather than a fixed price supply contract. Air-A-Plane claimed breach of contract by the US
government. The Court of Claims decided in a preliminary hearing that the issue was entirely
arguable at trial, although the Court was also clear that it was dealing with a species of cardinal
change, not a separate doctrine.

This paper will not comment in substance on the mechanics of these two American doctrines, but
instead will focus on the way in which English Law deals in practice with the problem thrown up by
these two doctrines and in particular the “cumulative impact” doctrine.

The English Position

The first point to make (and it is a point which can be stated categorically) is that the concept of
Cardinal Changes does not exist in English Law. There is no distinction made between contractual
relations which involve the state and a private entity and those between two private entities. English
law does provide for the situation where a party effects an alteration in the work so drastic that it
effectively requires the contractor to perform duties materially different from those originally
bargained for, but there is no distinction with respect to the Government. However, as stated above,
the law of the United States does not restrict the doctrines conceptually (nor practically) to relations
between the Government and private individuals.

As an aside, there is only one recorded situation under English contract law (that the authors are
aware of) where the issue of “cumulative changes” has been approached in any other way. This
occurred in the context of employment law and is arguably analogous to the American position. It has
been accepted that incremental changes in an employee’s duties, not in themselves necessarily
repudiatory breaches, can amount in the round to an intention on the part of the employer not to be
bound by the contract of employment and therefore amount to a repudiatory breach7.

Before we consider the areas of breach of contracts and the specifics of construction contracts it is
worth restating certain basic aspects of the law of contract starting with the law of implied terms.

Implied Terms
One way in which English contract law protects any party to a contract is the mechanism of implied
terms. There a number of these deriving from Common Law or Statute such as “fitness for purpose”
and “satisfactory quality”. There are three in particular that are relevant in the context of this paper.

7
Coleman v S & W Baldwin [1977] IRLR 342, a decision of the Employment Appeal Tribunal
There is a principle known as the “Moorcock principle”8 which states that the law raises “an
implication from the presumed intention of the parties with the object of giving to the transaction such
efficacy as both parties must have intended that all events it should have”. In brief the law expects
that parties enter any given contract with the mutual expectation that the contract can be performed.

This principle is taken further in a separate implied term that the parties will co-operate to ensure the
performance of their bargain. This principle will only be implied into a contract where the subject
matter of the contract requires both parties to co-operate to give efficacy to the contract.9

Furthermore there is also a doctrine that implies a term that a party will not do an act which, if done,
would prevent fulfilment of the contract. This is summed up in the 1864 case of Stirling v Maitland10
as follows:
“If a party enters into an arrangement which can only take effect by the continuance of a
certain existing state of circumstances, there is an implied engagement on his part that he
shall do nothing of his own motion to put an end to that state of circumstances under which
alone the arrangement can become operative.”

It must be remembered that the Courts will only imply these terms into any given contract after an
examination of the facts in question and these last two terms will not be implied into every contract.
The test the Courts apply is the standard test as to whether it is equitable and reasonable in all the
circumstances.

Performance
“The general rule is that a party to a contract must perform exactly what he undertook to
do” (Chitty 22-001). This general rule has been moderated by the concepts of partial
performance and substantial performance which are not addressed within this paper.

There is, however, one specific point made in this section by Chitty that is directly relevant to the
subject matter of this paper is contained at paragraph 22-036; ‘Defendant preventing complete
performance’ as follows:
“If the other party to the contract wrongfully prevents the claimant from completing his
performance, the claimant may either recover damages for breach of contract, or
alternatively sue upon a quantum meruit to recover a reasonable remuneration for his
partial performance.”11

The question of what would be the ‘appropriate measure of damages” is discussed further below.

Rescission – Substituted Contracts

The next area to consider is that of rescission. Rescission in its most basic form is where neither party
has performed the whole of his obligations and there is a mutual agreement to rescind the contract.
Such a rescission can be express or implied. Chittty sets an explanation of where rescission can be

8
The Moorcock (1889) 14.P.D. 64, 68
9
Luxor (Eastbourne) Limited v Cooper 1941 AC 108
10
Stirling v Maitland (1864) 5 B. & S. 840, 852.
11
Planché v Colborn (1831) 8 Bing. 14
implied where the parties have effected such an alteration of the terms of the contract to substitute a
new contract in its place10:
“The question whether a rescission has been effected is frequently one of considerable
difficulty, for it is necessary to distinguish a rescission of the contract from a variation
which merely qualifies the existing rights and obligations. If a rescission is effected the
contract is extinguished; if only a variation, it continues to exist in an altered form. The
decision on this point will depend on the intention of the parties to be gathered from an
examination of the terms of the subsequent agreement and from all the surrounding
circumstances. Rescission will be presumed when the parties enter into a new agreement
which is entirely inconsistent with the old, or, if not entirely inconsistent with it, inconsistent
with it to an extent that goes to the very root of it. The change must be fundamental and the
“question is whether the common intention of the parties was to ‘abrogate’, ‘rescind’,
‘supersede’, or ‘extinguish’ the old contract by a ‘substitution’ of a ‘completely new’ or
‘self-subsisting’ agreement””

There are two very obvious points to make about this paragraph. First the test relies on the parties’
intentions and secondly the test is highly subjective. Furthermore the phrase “from all the
surrounding circumstances” is very vague as well as being highly subjective.

Variations
Moving on to the topic of variations, the definition of variations adopted is that employed by Hudson
(at 7 – 001). It is a narrow definition and applicable specifically to construction contracts. A
variation according to Hudson is “an alteration in the previously described work and materials to be
provided by the contractor”, a narrow definition distinguished from the wider American concept of
changes, which allows for modification of the contract price and obligations, neither of which in
Hudson’s opinion involves any change in the permanent work.

Instead a variation in English law represents an alteration instructed by the Employer or his agent, the
cost for which the Employer will be responsible.

This leads Hudson onto a discussion of the word “scope” and “work falling outside the scope”,
adopting a wide description of scope as including not just the original contract work but also the
legitimate variations and changes ordered throughout the contract.

Hudson does accept that work might be called a variation to allow an employer to obtain the benefit
of a contractor’s prices or his presence on site whilst the work in question could not be regarded
coming within the contemplation of the variations or change clause in question. Hudson quotes a
1900 American case which states that the usual “scope” of variation clause:
“…is limited by the subject-matter and intention of the parties when it was made, to such
modifications of the work contemplated at the time of making the contract as to not radically
change the nature or cost of the work or materials required. For all other work and
materials required by the alterations, the contractors may recover the reasonable value,
notwithstanding the agreement.”12

12
Smith v Salt Lake City 104 Fed.Rep.457 (1900)
Hudson concurs with this position and sets out six submissions which follow on from this point and
are paraphrased for the sake of brevity as follows13:
(i) The contractor will be entitled to refuse to carry out the instruction.
(ii) If the request is purportedly given under the variation clause and the contractor
complies without objection, he will be estopped from subsequently claiming any
right to payment other than under the terms of the contract.
(iii) If the request is made without any reference to the variation clause then the
contractor will be entitled to reasonable remuneration on the basis of an implied
reasonable price under a separate contract.
(iv) “On the strict basis of interpretation applied to exclusion clauses, the courts will
construe restrictive provisions, for example, those requiring written instructions as a
condition precedent, as applying only to work ordered within the scope of the
clause, so enabling the contractor to recover a reasonable price for work outside its
scope free of any such restrictions”.
(v) If work outside the scope is carried out, then the original pricing mechanism should
only be departed from with respect to the work outside the scope and not any part of
the original contract works.
(vi) “If a claim is advanced to re-price the whole contract because of multiple variations
or changes”, each of which is individually admitted to be within, but in total alleged
to be outside, the scope of the clause, this implies that at some stage the contractor
would be entitled to refuse to obey the instructions, and re-pricing of the whole
could only, it is submitted, be justified on the basis akin to frustration of the
contract. This claim does not appear to have succeeded in England or the
Commonwealth, and has been rejected in many reported cases in the Court of
Claims in the United States.”

Although these six submissions are largely unsubstantiated by case law and represent editorial
opinion, they would appear to be a good summation of the current position in English Law. However,
there are the following comments on the second, fourth and sixth principles.

Dealing with the second principle first, it is not certain that a contractor will always be estopped from
claiming an alternative right to payment after the works have been carried out. It is possible to think
of examples where due to “efficacy of contract” or undue influence/duress a contractor would carry
out works without objecting at the time.

Turning to the fourth principle, it is not totally certain what point Hudson is making but it seems that
unless a variation is ordered within the contractual mechanism provided, the contractor will be
entitled to recover a reasonable price for such work outside of any contractual mechanism for
payment (i.e. on a quantum meruit basis).

The sixth principle is important, as this is the clearest commentary available on the English
perspective on the “cumulative impact” doctrine.

13
The full propositions can be found at paragraph 7.080 at pages 929-930 (Hudson 11th edition)
Hudson then turns explicitly to the question of pricing works outside the scope which is reproduced
here in full:
“It is sufficient to say that, even in a case of a repudiatory breach of contract by the owner,
let alone “outside the scope” alterations of the work, a contractor will be unable to make
such a claim unless he has accepted the repudiation and rescinded the contract, with the
possible exception of rare cases where it is no longer possible to trace, identify and separate
the original and the altered parts of the work. “Scope” arguments, therefore, will at best do
no more than enable a contractor either to refuse to carry out the work at all, or to secure a
valuation of such work as has been carried out outside the scope of the variation clause at
reasonable prices differing, where appropriate, from those obtainable under the clause, and
free also of any other restrictions, including requirements of form, which might have applied
to “within the scope” variations it is submitted”.

A number of examples are cited, one of which is drawn from an American case concerning the
contract for the construction of an aircraft hangar for the US Government13. In this case the Court of
Claims found that the changes were of such a magnitude that they constituted a “Cardinal Change”
with the effect that they were not within the scope of the contract and were therefore a breach of
contract and the contractor was entitled to new prices for the work. Hudson is keen to note the
following:
“… no claim was made that the project as a whole required to be revalued or repriced, and
that the finding of “cardinal change” was basically jurisdictional, enabling the Court to
award damages for breach and consequential loss not recoverable under the strict terms of
the changes clause, and it should be understood in that context.”

The final comment made by Hudson that is applicable in this instance is a practical point. One of the
major obstacles that contractors have to overcome, is that in building and engineering projects which
are of necessity often prototypical, the variation in question is unlikely to constitute a change outside
the scope of the contract unless and until the contractor takes some form of stand on the matter.

Too often the contractor works to the change, accepts payment and subsequently contends that he is
entitled to quantum meruit. Hudson makes the point that for an entitlement for a quantum meruit
payment to arise there must be a new contract and cites Lord Dunedin in The Olanda14as authority:
“As regards quantum meruit where there are two parties who are under contract, quantum
meruit must be a new contract, and in order to have a new contract you must get rid of the
old one.”

It is suggested that Hudson is too dogmatic on this point. Instead a “variation” that instructs work
“outside the scope of the contract” need not necessarily terminate the original contract but may form a
separate contract in addition to the original contract.

The position in Keating is greatly simplified as follows;

13
The Olanda [1919] 2K.B. 728
 “Where there is a contract for specified work but the contractor does work outside the
contract at the employer’s request the contractor is entitled to be paid a reasonable sum for
the work outside the contract on the basis of an implied contract.15

Keating notes that Parkinson’s case was only concerned with payment for extra work and was not a
case that the entirety of the contract works should have been revalued. Keating cites a Canadian and a
Scottish case as authority where the Courts have considered a claim that the entire case should have
been revalued but have rejected the proposition.

The earlier of these two cases is Morrison-Knudson v British Columbia Hydro and Power Authority15.
The initial trial judge in this case found that there had been a multitude of breaches which amounted
to a fundamental breach of contract. The trial judge therefore found that although the contractor
continued the work and completed the contract he was entitled to have treated the contract as
terminated and was therefore entitled to payment on a quantum meruit basis. This was appealed to the
British Columbia Court of Appeal. They upheld the appeal on the basis that the contractor had
elected to continue with the contract and therefore payment was limited to recovery under the
contract. The Court found that for quantum meruit to apply the contract must have been rescinded or
discharged so that the mutual obligations had ceased to exist.

As a point of interest this case considers much of the case law generated by the English, American
and Commonwealth courts and confirms the law as stated throughout this note with respect to subjects
such as quantum meruit. The case did not have to consider the issue of repudiation of an entire
contract and what damages would flow from such a repudiation as the Court found that there had been
no fundamental breach. There is nothing in the full case note in Construction Law Journal which
suggests that the court would have departed from the common law principles of repudiation of an
entire contract and quantum meruit being the correct measure of damages if the facts had so required.

The second and more recent case is the case of ERDC Construction Ltd v HM Love & Company and
others16. This case was heard by the Scottish Court of Session (equivalent to the English Court of
Appeal). It arose out of an arbitration which was concerned primarily with what constituted the
essential nature of a quantum meruit claim. The case follows both Morrison-Knudson and Humberoak
closely. Two findings in particular are of interest. First, the Court of Session determined that a claim
for quantum meruit was a claim which was inconsistent with the continuing existence of a contract.
Secondly, where the claimants had not promptly elected to treat the contract as determined they were
not entitled to claim a quantum meruit whether in whole or in part. It is worth noting that one Court
of Session Judge dissented on this point on the basis that repudiation was not needed before the works
had been completed since there might be situations where the effect of the employer’s breach might
not become known or properly understood until the works have been completed.

Discharge by Frustration

15
Morrison-Knudson v British Columbia Hydro and Power Authority (1978) D.L.R. (3d); also reported at (1991) 7 Const. L. J. 227
16
ERDC Construction Ltd v HM Love & Company and Others (1994) 70 B.L.R. 67
The subject of frustration is touched on briefly for the sake of completeness. Although frustration is
not relevant to this discussion it is raised to show that it can be discounted. The standard test for
frustration is laid down in Davis Contractors v Fareham UDC17where it was stated that frustration:
“occurs wherever the law recognises that without default of either party a contractual
obligation has become incapable of being performed because the circumstances in which
performance is called for would render it a thing radically different from that which was
undertaken by the contract. Non haec in foedra veni. It was not this that I promised to do.”

The test for frustration requires that neither party be in default. This is not an easy position to adopt in
the context of the potential frustration arising out of a single instruction or series of instructions.
Furthermore, foreseeability will often preclude the possibility of frustration and therefore it is close to
impossible to argue frustration arising out of an instruction purporting to be under a building contract.
As a final point on frustration, the phrase “self-induced frustration” is often misapplied in
circumstances such as these. Self-induced frustration occurs where a party seeks to rely upon a
discharge from contractual obligations where the basis of the discharge is frustration due to his own
conduct.

Discharge by Breach
This section effectively follows on directly from the analysis on variations above. The first and most
important point to consider is whether the claim is made under the contract or is for breach of
contract. Chitty describes this as fundamental and both Chitty and Keating refer to the Humberoak18
case on this point.

Keating also makes the point that many building contracts give contractors contractual rights to
additional payments in circumstances some of which might otherwise be breaches of contract by the
employer. In such circumstances these rights will be in addition to and not in substitution of common
law remedies for damages for breach of contract. Keating gives as examples clause 26 JCT – Loss and
expense and Clause 52 ICE – provision for variations.

If the breach gives rise to a claim that can be made under the contract (e.g. liquidated damages for late
completion) then the contractual mechanism will be utilised. However, breach of contract will create
a different mode of claim. The first consideration is what has been breached. Not all breaches will
give rise to a discharge. It is important to determine whether the breach is of a condition or an
intermediate term.

A breach of condition will allow the innocent party to consider himself discharged from his
contractual terms. A breach of an intermediate term may allow an innocent party to treat himself as
discharged. For the breach to allow discharge, the breach must “go to the very root of the contract”.
This has also been described as “affecting the very substance of the contract” or “frustrating the
commercial purpose of the venture”.

The current test applied in English law is that laid down by Diplock LJ:

17
Davis Contractors v Fareham UDC [1956] A.C. 696, HL
18
McAlpine Humberoak v McDermott International (No1) (1992) 58 BLR 1
 “Does the occurrence of the event deprive the party who has further undertakings to perform
of substantially the whole benefit which it was the intention of the parties as expressed in the
contract that he should obtain as the consideration for performing those undertakings?”19

This leads on to a discussion of non-completion where the cause may be prevention by the employer,
breach by the contractor or frustration. Concentrating only on default by the employer, it is clear from
the above principles that the contractor may be able to treat the contract as discharged by relying on
repudiation by the employer. Keating at 6-89ff lists out examples where the actions of an employer
amount to a repudiatory breach of contract. These include:
· Refusal to carry out obligations under the contract.
· Failure to give possession of the site.
· Order not to complete the works.
· Employment of additional contractors.
· Rendering completion impossible.

Keating does not give an example which is even analogous to issuing instructions outside the scope of
the works. However, one can easily see an argument that issuing such instructions would fall under
the heading of rendering completion under the contract impossible by issuing instructions to the
degree that if those instructions were followed the contract as originally signed would be rendered
impossible to achieve and therefore the contract has been repudiated.

Damages
The position on damages seems to be straightforward. If the work as instructed was capable of being
carried out under the contract, it will be priced under the contract. If the employer prevents
completion then one of two approaches will be adopted (these are not mutually exclusive). First the
contractor will be compensated for the loss of profits and secondly he will be paid for any work
carried out under the “new contract” further to the instruction to carry out work “outside the scope”
of the original contract.

McGregor on Damages notes with surprise that there is no English case which deals with the measure
of damages where the employer acts in such a way to bar completion (16th edition paragraph 1154 at
page 755). He sets out three different methods for compensating the contractor. These are not detailed
here, but essentially they are three different ways of awarding the contractor the costs incurred to date
together with an allowance for loss of profits on the residue of the works which he would have carried
out.

Turning to the second limb of damages, quantum meruit has already been touched on above in the
section on variations. Keating suggests that quantum meruit will normally be left to the courts to
determine and that the courts would not be expected to adopt the rates previously utilised in the
repudiated contract. Instead, a reasonable sum would be assessed by reference to negotiations as to
price, prices in a related contract, expert evidence on the cost of labour, materials, overheads and
profit. However, in a scenario like this the court will happily adopt the rates from the original contract
and ask the contractor to demonstrate why he would be entitled to an uplift.

19
Hongkong Fir Shipping Co. v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26, 66.
McAlpine Humberoak
This case is not “on all fours” with the American concepts of “Cardinal Changes” and the cumulative
impact doctrine but does seem to be the nearest that English Law has come to dealing with these
issues. Humberoak concerned a contract between McAlpine and McDermott for the construction by
McAlpine of nine steel pallets to form part of a weather deck for a tension leg platform in the
Shetland Basin.

From the beginning the job did not go smoothly. McDermoott issued a large number of drawings and
McAlpine issued a large number of technical drawings in reply. McAlpine sued claiming delay and
McDermott counterclaimed alleging defective workmanship. The Judge at first instance (largely of his
own accord) found that the large number of drawings had distorted the substance and identity of the
contract with the result that it was frustrated. This frustration led to a substituted contract and
therefore McAlpine had a reasonable time to complete the works (i.e. time was at large) and they
could do this for a reasonable cost (i.e. quantum meruit).

This was appealed successfully on the facts. The leading judgment was that of Lloyd LJ. He found
that that the large number of drawings did not constitute a breach by McDermott. He accepted that
the number of drawings may have allowed McAlpine an extension of time but he did not see that the
contract had been distorted. He found that the contractual machinery had not been displaced and most
tellingly there could not be frustration where the frustration was brought about by reasons of matters
provided for in the contract itself.

This case establishes 2 principles in English law:

(a) that a series of variations will not in itself constitute a breach of contract; and
(b) English law recognises neither the concept of Cardinal Changes nor the “cumulative
impact doctrine”.

Although the case turns on its facts the following can be put forward as a summary of the current
position in English law:
· To establish a repudiatory breach of contract a single variation must require the work ordered to
be so far outside of the “scope of the contract” that the change order goes to the route of the
contract and is a fundamental change to the contract.
· A series of variations will not constitute such a fundamental change. A specific variation could.

It is conceivable that a number of variations when taken together could likewise constitute a
fundamental change but this point has not been advanced in any English case law and whilst not
precluded by Humberoak would effectively be new law.

Conclusions
It is strongly arguable that the US doctrines of “Cardinal Changes” and the “Cumulative Impact
theory” do not exist in English Law.

However in their place and particularly with respect to the minefield that is the law of “variations”,
English Law has developed a complex approach to allow Contractors and Employers a series of
mechanisms for ascertaining their contractual rights and remedies.
Whereas the American Contractor often tenders with cost and time certainty, by the very nature of the
tender process in English Law (c.f. “The Pre-Tendering Process Revisited”20) English Contractors are
more often than not subject to the vagaries of applying for variations under their contracts. This is
most crucial when they seek to rely on Employer interference to justify Extensions of Time
Applications which if the fail to achieve will result in the flip side of the coin namely the deduction of
Liquidated Damages.
A Contractor faced with a contract in delay (and the Employer and its agents) will need to have a clear
understanding of the critical time path and the impact of variations on the contract.

As practical advice, Employers must be educated as to the effect that their requirements will have
once a contract is under way. If their involvement can be construed as interference then they may
allow a Contractor to argue that one (or more but on a separate basis) variation/change instruction was
so far removed from the scope of the contract that it constituted a repudiatory breach of contract.

This would then allow the contractor to argue for payment under a new contract on the basis of
quantum meruit. This will be heavily dependent upon an analysis of the factual matrix and as a
general rule of thumb it is contended that it will, in most cases be hard to argue that the entire contract
has been repudiated. At best one (or more) variation/change order will be deemed to stand outside the
contract and therefore form a contract by itself with payment on a quantum meruit basis.

The authors of this paper have formulated the following questions to assist the parties in determining
where they stand under (or outside!) the contract:
· Were any of the instructions outside the scope of the original contract?
· Were such instructions acceded to?
· Were such instructions performable?
· If yes then there was no breach just “extras” under contract – if no what did the contractor do?
· What price mechanism was adopted?
· If there was a new contract did they price on quantum meruit or did they adopt the pre-existing
pricing mechanism by common dealing?

Lewis Cohen, Solicitor, Construction & Engineering Group

lewis.cohen@speechlys.com

This article was written with Jonathan Miller of 1 Essex Court

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Cohen & Browning (1998) 14 Const. L. J. 251 - 257