ConstructionPro Week, Volume: 3 - Issue: 17 - 04/25/2014

Do Project Owners Make ‘Claim’ a Dirty Word?

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.

 

COMMENTS

It's absolutely true that Owners and their representatives (often the Architect) discourage formal claims. Then, later if a settlement becomes difficult, they rely on the notice requirements to weaken the contractors claim for compensation. Contractors need to send in formal notices of claims early on in the project to establish the need for all parties to honor the dispute resolution clauses the Owner and the Architect have written into the contract.
Posted by: Gregg Hothem - Friday, April 25, 2014 10:00 AM


From an owner's perspective, it is essential that changes during the contruction process are identified, communicated and resolved for safe construction. "Claim" aspect has been of secondary importance to me in my employment representing the owner's best interest. Safety was our first and primary concern.
Posted by: Theresa McGinniss - Friday, April 25, 2014 11:25 AM


We are involved in the Military Construction Sector where the "owner" is the Contracting Officer (KO). There is a FAR clause requiring contractors to notify the KO in so many days when a potential claim situation arises. many small contractors are reluctant to exercise that right thinking they are creating an adversarial climate. Far from reality. Having been on the KO side of things and now advising clients in their pursuit of these contracts; such attitude is not condoned by KOs. They expect and advise Contractor's to file their notice of a changed condition as prescribed by the FAR clause. Both the KO and the Contractor are bound by that clause. A KO creating a different climate is in violation of their own regulations and that action protested. Lawyer heaven. The private Sector is probably a different mine field.
Posted by: Ron Vietmeier - Friday, April 25, 2014 12:38 PM


Following the above comment, at all times both parties are bound by, "What does the contract say".
Posted by: R. Gary Klein - Friday, April 25, 2014 1:14 PM


Very frustrating topic - We have been "told" by inspectors / aka=Owners representative, that ..."we're not going to have a bunch of written claims dragging down this job - we want them submitted all at once when we get tp the end"... of course, that's after contractual time has elapsed for written notice ... and yes, we were leveraged to their advantage.
Posted by: Bobby J. Thompson - Friday, April 25, 2014 4:39 PM


Any/All claims must be acknowledges by all parties involved "Period" Also Claim should be

resolved within 24 hours clause work wonders and how to proceed. Simply add this language

to the contract and keep the project moving forward. Owner/Architect holds up the paper work make sure your contract has another clause

triggers a response and down time cost. this will keep everyone privy to the notice of change order, Detail the Cost Material and Labor or Credit to your scope of work and

Proceed. Like a good Attorney told me if it "is not in writing it never happened" !!!!!!
Posted by: Kenneth Jones - Friday, April 25, 2014 5:10 PM


I experience lot of cases where contractors are discouraged to submit "claim" in a formal way,instead, Project owners prefer to resolve these matters informally without the administrative structures of formal claim procedures and quietly negotiate a resolution of the matter after the claim notice period had passed
Posted by: lucy wu - Sunday, April 27, 2014 8:54 PM


As a Contracting Officer I do not encourage or discourage a contractor from issuing a claim. My primary task is to occasionally remind the contractor of the requirement to comply with the notice provisions in the contract. If the contractor will do that, it makes it much easier to deal with a claim on its own merits without the cloud of expired windows to make that claim. Also, as in all things related to contracts, trust between the parties is paramount to head off disputes about compliance with a notice provision.
Posted by: Chris Akers - Monday, April 28, 2014 10:45 AM


 









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