By Bruce Jervis
Construction contracts usually contain notice-of-claim provisions. The contractor must, within a stated period of time, notify the project owner in writing of any occurrence which may give rise to a claim for additional compensation under the contract. The policy behind these requirements is sound. Owners should have the opportunity to respond to problems as promptly as possible while options are available and costs can be mitigated.
Notice-of-claim provisions also have teeth. The contractor’s failure to give timely written notice of a claim occurrence will constitute a waiver of the right to any additional compensation under the contract. Courts take two different approaches to this language. Sometimes, such as a recent case from New York, failure to give proper formal notice is a bar to additional compensation even if the project owner had actual knowledge of the occurrence. The requirement is strictly enforced.
Other times, such as a recent decision by the Wyoming Supreme Court, the requirement is interpreted in a more permissive manner. Some notice is sufficient and strict compliance is not mandated. A contractor was allowed to pursue a claim for extra work despite the failure to break down the cost elements of its claim.
How do you feel about this? Should these notice requirements be strictly enforced for the protection of project owners? Or does strict enforcement place form over substance and cause contractors to forfeit legitimate claim rights? I welcome your comments.
Featured in Next Week’s Construction Claims Advisor:
- Expert Opinion on Standards Could Not Trump Specifications
- Subcontract Involved More than Financing – Ruled Not a Sham
- Replacement Cost Damage Award Upheld