vikram_unde wrote:Today I came across new term "Constructive Change"? Can you please help me to understand this term in more detail with any example? Thanks!
Which statement on constructive changes is FALSE?
A. Constructive changes are contract changes which are construed from actions taken by either party, not from a change document. - TRUE
B. Changes in projects under contract are called constructive changes if they yield benefits for both parties. - FALSE
C. Constructive changes are a frequent cause of disputes and claims of one contract party against the other. TRUE
D. Field changes should be meticulously documented to avoid an interpretation as constructive change. - TRUE
This is one of the confusing terms in contract, the literal meaning of constructive change is something positive, meaningful, but the contractual terms 'constructive change' is usually an undocumented change which is verbally(or email) agreed between parties but not formally documented. The compensation for such changes is also verbally discussed. This also means that such changes do not go through a formal change control process or contractual amendment.
Constructive changes are usually in construction related contracts.
there are 2 different definition of these terms in construction industry
1. A change to a contract resulting from conduct by the owner that has the effect of requiring the contractor to perform work different from that presented in the contract.
2. An act or failure to act by the owner or the engineer that is not a directed change, but which has the effect of requiring the contractor to accomplish work different from that required by the existing contract documents.
Examples may be : lack of direction from owners as per contract, lack of inspection from Owner,
So as per options provided B is right choice and constructive changes are not always beneficial to both parties, usually they have adverse impact to seller.
On other hand directed changes are well documented and are approved through formal CCB process.
Since Constructive changes are not documented they usually are sources of dispute in case of disagreements