Construction contracts frequently include a “notice of claim” provision. The contractor is required to provide the project owner or owner’s representative with a written notice of claim within a stipulated number of days of the occurrence giving rise to the claim. If the contractor was not aware of the occurrence, notice must be provided within a stated number of days of the contractor’s discovery of the event. Failure to give timely written notice operates as a complete waiver and release of the contractor’s claim rights.
These contract clauses are not always limited to notice of the claim event itself. They may require an itemized accounting of the increased costs the contractor expects to incur as a result of the occurrence – a statement of damages. That was the case in a recent highway construction contract in Hawaii.
The state learned immediately of the discovery of an existing subsurface utility not indicated in the state’s drawings. The state issued directives and paid the direct cost of dealing with the problem. But when the contractor filed a claim for the impact costs, the delay and disruption to the project as a whole, the notice of claim requirement raised its head. The state said the claim was barred due to lack of timely written notice. The contractor responded that the state had suffered no harm, no prejudice, as the state had been aware of the situation from day one. The state said it should have received notice of the type of damages the contractor would claim, enabling the state to track and monitor those actual costs.
Friends, I invite your comments on this issue. Is it reasonable to expect a contractor to provide an itemization of damages before those costs have even been incurred? If a project owner is on notice of a claim event or occurrence, doesn’t the owner have all the information it needs to protect its interests?
Featured in next week's Construction Claims Advisor:
- Contractor Penalized for Under-Utilization of Listed Lower-Tier Subs
- Contractor Deviation Justified Lack of Progress Payment
- Technical/Price Tradeoff Not Justified
Bruce Jervis, Editor
Construction Claims Advisor