By Bruce Jervis
Construction contracts frequently contain a “notice of claim” requirement. If a contractor believes an occurrence entitles the contractor to additional compensation under the contract, the contractor must give the project owner written notice within a stipulated number of days of the date of the occurrence. Failure to do so bars any recovery of additional compensation.
One might assume a prudent contractor would be quick to give formal notice of claim, even in borderline situations, in order to preserve the contractor’s rights. The prevailing culture, however, is to the contrary. Claim notices seem unduly adversarial, even unsavory. Project owners prefer to resolve these matters informally without the administrative strictures of formal claim procedures. Contractors are often discouraged from submitting written claim notices.
Can this attitude operate to waive the contractual notice requirement? That question was addressed in a recent Georgia case. It was alleged that a public project owner had a longstanding pattern of actively discouraging formal notice, making “claim” a dirty word, and then quietly negotiating a resolution of the matter after the claim notice period had passed. The court ruled, however, that the historic conduct of the owner did not alter the express terms of the immediate contract. The written notice requirement was enforceable.
This ruling, while legally sound, is unfortunate for contractors. Is it not true that many project owners actively discourage contractors from availing themselves of the formal, contractual claim process? Have you experienced situations where there are assurances of future satisfaction but no action until the notice period has expired and the contractor’s rights are compromised? I welcome your comments.