Notice of claim clauses are common in construction contracts. The contractor must give timely written notice of an alleged change or else the contractor waives the right to additional compensation. Some of these clauses simply address the project owner’s reasonable need to manage its project and control its budget. But some are designed as lethal traps to defeat contractor claims for changed work.
A clause in a Utah state public works contract required contractor notice of an alleged change in the contract if that change was not “intentional” on the part of the owner’s representative. The Utah Supreme Court ruled that the rep’s subjective belief at the time was determinative, even if that belief contradicted the express terms of the contract and was not reasonable.
This ruling meant the state DOT avoided responsibility when the DOT representative ignored a contract term authorizing the on-site disposal of excavated materials and directed off-site disposal. The contractor did not give a five-day written notice. All the rep had to do was say he did not believe at the time that his directive was a change in the contract.
The other case in this issue involved a defaulted federal contractor and its performance surety. If the government assessed reprocurement costs directly against the contractor, the contractor could challenge those costs. But once the government and the surety entered into a takeover agreement, the contractor could not challenge their agreed reprocurement costs, even though the contractor might ultimately be responsible for indemnifying the surety.
