Contractors are frequently required to provide notice of a claim. Formal written notice must be served within a stipulated number of days of the occurrence giving rise to the claim.
Failure to provide timely notice is a waiver of the contractor’s claim rights. This is a harsh rule and a trap for contractors if the notice period starts to run with any “occurrence” in the field during ongoing construction. Fortunately, the contract language is not always applied in this manner.
Contracts generally call for initial, field-level decision making by the owner’s representatives before a matter ripens into a claim. There is also the possibility of owner waiver of the claim notice requirement through a course of conduct by the owner and its representatives during the project. Both of these questions came into play in a recent decision by an Ohio appellate court.
The other case in this issue involved a federal contracting officer’s waiver of the prime contractor payment bond requirement, unbeknownst to a subcontractor. Retainage had been increased in lieu of the payment bond, but the government had released the retained funds to the prime. The unpaid sub was allowed to sue the federal government as an intended third-party beneficiary of the prime contract.