Contract Notice Provisions - Beware

A typical construction scenario occurs when a contractor or subcontractor is ordered to perform work that the contractor or subcontractor believes to be beyond its contractual scope. The contractor or subcontractor performs the work, keeps records of the additional costs and, after the work is completed, submits a claim. The claim is denied. Litigation commences and during trial a judge determines that the work was beyond the scope of the contract or subcontract, and the amount claimed was the fair value of that extra work. Therefore, the contractor or subcontractor would conclude that it would absolutely win the claim. WRONG! Why?

Most contracts contain provisions, either in the contract or the general conditions, which require a contractor or subcontractor who makes a claim for extra work to give notice of that claim within a specific time frame. These provisions generally mean that you cannot wait to complete the claimed extra work before you give notice of your claim.

For example, the American Institute of Architects (AIA) general conditions require that the contractor or subcontractor give written notice of any claim "within 21 days after the occurrence of the event giving rise to such claim or within 21 days after the claimant first recognizes the condition giving rise to the claim, whichever is later". Some notice clauses are more complex and require a number of steps to perfect the claim before you even perform the work; and some require an additional itemized statement of the claim during performance or shortly after completing the disputed work. In many instances a written notice that you will perform work under protest prior to doing the work may not be sufficient to protect your right to recover the claimed amount.

A recent decision of the Massachusetts Appeals Court confirms the necessity of strict compliance with written notice provisions of the contract. Even where the contractor sent a letter saying that it would seek extra costs, and representatives of the awarding authority made personal observations of the problem encountered by the contractor and knew the contractor claimed extra compensation, the Court found that compliance with the written notice provision was paramount and was not excused. The Court denied the contractor all relief even though he had done hundreds of thousands of dollars in extra work.

Don't get caught in a technical deficiency when you intend to make a claim for extra compensation. Always make sure that you and your field personnel are aware of and follow all notice provisions that are needed to perfect your claim. Failure to follow those provisions to the letter can result in the denial of an otherwise legitimate claim for extra work.

Submitting incorrect or false payroll information or certificates of compliance is a prescription for disaster inviting stiff civil and criminal penalties. False statements will eventually come to light either through diligent enforcement, jealous competitors, or dissatisfied employees.

This newsletter is intended to provide general information of interest to the construction industry. It is not intended to provide specific legal advice or to address fact specific issues. For that you should consult your legal counsel. Corwin & Corwin LLP assumes no liability in connection with the use of this newsletter. The Supreme Judicial Court may consider this material advertising.