While construction contracts usually require the contractor to provide prompt notice of an occurrence giving rise to a claim, the actual adjudication of the claim – the determination of owner responsibility and the recovery of costs – is another matter. Contracts frequently mandate an attenuated process of nonbinding mediation and other administrative procedures. A final decision on the merits of the claim may be years away.
A recent Florida case illustrates this problem. A contract clause said no demand for arbitration or filing of a law suit could occur until after final acceptance of the work. Unfortunately for the contractor, this was a four-year highway project. The contractor sued on a claim that arose in the opening months of the project. The claim was premature, but successful. When the contractor attempted to litigate claims that arose later in the project, the claims were barred. The contractor was required to consolidate all its claims in a single action. It could not litigate them in a serial fashion.
A dissenting opinion in this case argued that this was an injustice to the contractor. The subsequent claims arose out of distinct occurrences and involved completely different costs. The public project owner, having paid on the initial claim, was now receiving a “get out of jail free” card. The contractor had no recourse for subsequent breaches of the contract.
Is it unfair to project owners to require them to defend a series of claims? Should contractors be required to package all their claims in a single action? Or, is this just another procedural stumbling block designed to prevent contractors from exercising their full contractual rights?
As always, I invite your comments below.
Featured in next week's Construction Claims Advisor:
- Contractor’s Complaints Were Not Repudiation of Contract
- “Responsive” Proposal Not the Same as a Responsive Bid
- Reciprocal Waiver Applied to Separate Prime Contractor