You Are on Notice: Failure to Comply With Contractual Notice Provisions Can Be Fatal to Your Claim

Jenifer B. Minsky | ConsensusDocs

Imagine your firm is the construction manager on a multi-million-dollar project. At the end of the project you are five million dollars out-of-pocket. You have a stack of claims for additional and extended work which led to the overrun, payment for which will easily cover the shortfall. However, the owner refuses to compensate you until you can satisfactorily answer their inquiry: “Where are the notices that are expressly required under the terms of the contract?” You had a good relationship with the owner’s field representative who was aware you were performing the work and understood that your company was compiling claims. The once cooperative owner, now suffering financial restraints of their own, is resolute in their refusal leaving you no choice but to expend substantial sums of money to litigate the claims, the success of which is far from assured. 

What Contract Language Can Be A Trap For An Unwary Contractor?

While courts are generally hesitant to order a forfeiture and some courts disfavor condition precedents, a judge’s hands may be tied by particular contract language requiring the strict enforcement of notice requirements. Such provisions may include: (1) an explicit clause that there be precise compliance with notice requirements; (2) express  consequences for noncompliance (e.g., if the required notice is not provided the claim will be waived, forfeited or abandoned); (3) a statement that the notice requirements are a condition precedent to recovery; (4) language such as “if,” “provided that,” “or else” or “on condition that” (e.g., the owner shall review the claim, “provided such claim” was received within the applicable notice period) or (5) prohibition of any waiver of the notice requirement. To the extent the notice provision includes such language, a contractor can be without recourse even when the owner has actual knowledge of the claims or cannot show prejudice by the lack of notice.

In one particularly egregious federal case against the City of New York case, a contractor’s claims for approximately $16 million were dismissed solely as a result of the contractor’s failure to strictly comply with contractual notice requirements, even though the owner had actual notice of the claims.[1] The contract at issue obligated the owner to make an equitable adjustment in the contract price if they issued a change order which caused the contractor to incur additional costs or increased the contract time. It also required that the contractor, as a prerequisite to claiming an equitable adjustment, submit a written statement of the general nature and monetary extent of each claim within thirty (30) days of receipt of a change order. After the parties were unable to agree on a lump sum for numerous change orders the contractor sued. The court examined the documents that the contractor claimed constituted the required notice and found most were untimely and none adequately informed the City of “the monetary extent” of the damages claimed. It ultimately rejected the contractor’s claims on the grounds that the court could not ignore the parties’ contractual agreement that the contractor “comply strictly” with the notice requirements of the Changes Clause.

In another New York case, a masonry subcontractor was denied over $3 million in claims, a nearly 50% increase in their subcontract price, because they failed to provide notice of acts or omissions causing delay within five (5) days.[2] The court found the requirement to be a condition precedent to recovery of delay damages because the contract specifically provided that the failure to comply would constitute a waiver of the subcontractor’s damages claim.

Indeed, courts in numerous states have rejected claims for additional time or money when the contractor has failed to strictly comply with notice requirements under similar circumstances. For instance, in cases before the Washington State Supreme Court and the Court of Appeals of Minnesota[3], contractors lost claims for additional expenses or time because the contracts stated that by failing to follow the contractual notice procedures, the contractor waived any claim for additional work or time. The courts rejected the contractors’ arguments that the owners’ actual notice excused them from strict compliance with the notice provisions.

Even if a court might ultimately accept an argument that strict compliance with the notice requirements was unnecessary despite the language of the agreement, or because the owner had actual notice of the claims or was otherwise not prejudiced by the lack of required notice, success may require an expenditure of years and potentially millions of dollars litigating the matter.

How Can a Contractor Avoid a Loss Due to Noncompliance?

The answer to this question is simple in theory, but not necessarily in practice. You, as the contractor, must strictly comply with each one of the potentially significant notice and reporting requirements in your contract. For instance, a construction contract often includes different notice requirements for adjustments to the contract sum as opposed to the project schedule, including distinctly different time frames for providing notice and various reporting and follow-up obligations. For instance, you may need to give initial written notice of a claim within days of discovery or knowledge of same and then follow-up within a certain amount of time with a written supplement to the notice of claim. Just by way of example, the ConsensusDocs 200 Standard Prime Agreement and General Conditions provides at Section 8.4:

CHANGES NOTICE Except as provided in §6.3.2 and §6.4 for any claim for an increase in the Contract Price or the Contract Time, Constructor shall give Owner written notice of the claim within fourteen (14) Days after the occurrence giving rise to the claim or within fourteen (14) Days after Constructor first recognizes the condition giving rise to the claim, whichever is later. Except in an emergency, notice shall be given before proceeding with the Work. Thereafter, Constructor shall submit written documentation of its claim, including appropriate supporting documentation, within twenty-one (21) Days after giving notice, unless the Parties mutually agree upon a longer period of time. Owner shall respond in writing denying or approving Constructor’s claim no later than fourteen (14) Days after receipt of Constructor’s claim. Owner’s failure to so respond shall be deemed a denial of the claim. Any change in the Contract Price or the Contract Time resulting from such claim shall be authorized by Change Order.

In addition, recovery for certain types of work, such as that related to the discovery of hazardous materials or differing site conditions, often has additional requirements, including notice immediately upon encountering the materials and prior to making a notice of claim. In addition to notice of changes and claims, the vast majority of construction contracts also require notices for approvals, routine events, information and disputes, each of which may also have specific reporting requirements and which can have serious consequences for noncompliance.

While compliance may be difficult, it is far simpler and less costly than litigating the issue after the owner refuses to honor your claims. This can only be accomplished by a thorough review and understanding of each notice provision before the first shovel enters the ground and constant monitoring during the project to ensure that notice is being timely sent. In order to assist contractors with this task Peckar & Abramson has developed ProjectNotice®  3.0, a fully web based  interactive tool in which attorneys that are well versed in construction law and construction administration and have an in-depth knowledge of your specific contract requirements, prepare, in advance, the notice letters required under your contract and provide instructions as to when and how to send each of the letters. With ProjectNotice 3.0® you can house all your own project documents on a dedicated website, accessible from almost anywhere, and utilize numerous features that make working with those documents and communicating among members of your project team significantly faster and easier. Contractual compliance is achieved efficiently, minimizing the time your project staff spends on project administration and reducing your company’s potential exposure due to missed notice deadlines. 

[1] Perini Corp. v. City of New York, 182 F.3d 901 (2d Cir. 1999)

[2] Morelli Masons, Inc. v. Peter Scalamandre & Sons, Inc., 294 A.D.2d 113, 742 N.Y.S.2d 6 (2002)

[3] Mike M. Johnson, Inc. v. Cnty. of Spokane, 150 Wash. 2d 375, 78 P.3d 161, 169 (2003); GEH Const., Inc. v. Suburban Hennepin Reg’l Park Dist., No. CX-98-1675, 1999 WL 171502, at *3 (Minn. Ct. App. Mar. 30, 1999)

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Washington Supreme Court Reaffirms Compliance with Contractual Notice Requirements

Jennifer McMillan Beyerlein | Lane Powell PC | September 27, 2018

Today, the Washington Supreme Court unanimously held that failure to satisfy a “notice of protest” provision bars all claims for protested work — including claims for breach of the covenant and fair dealing and claims for expectancy and consequential damages. In Nova Contracting, Inc. v. City of Olympia, the Court reversed a Court of Appeals decision holding that Nova’s failure to file a written notice of protest did not bar the contractor’s claims for expectancy and consequential damages based upon a breach of the duty of good faith and fair dealing.

In this case, the City of Olympia contracted with Nova to replace a deteriorating culvert. During the submittal and approval process, the City rejected many of Nova’s submittals and ultimately ordered Nova to cease work and vacate the jobsite well before completion of the project. The construction contract between the City of Olympia and Nova required Nova to immediately notify the City in writing if it disagreed with various enumerated aspects of the construction and stated that Nova’s failure to do so would waive “any claims for protested [w]ork.”

The Court made several holdings. First, the Court held that the contract claim notice requirements applies to Nova’s breach of the covenant of good faith and fair dealing claims. Second, reasoning that the contractual term “any claims” meant all claims related to the protested work without exception, the Court held that by failing to file a written notice of protest, Nova waived any and all claims for protested work. Third, the Court also rejected Nova’s argument that its claim did not ripen until the City issued its stop work order because the construction contract contained an express obligation of continuing performance.

We advise that you seek legal counsel for questions relating to this ruling.

Talk is Cheap – Promises to Pay are a Poor Substitute for Adherence to Contractual Notice Provisions

Charlie G. Baxley – Bradley Arant Boult Cummings LLP – August 1, 2014

A recent Wyoming case – JEM Contracting, Inc. v. Morrison – Maierle, Inc. – serves as a reminder to contractors and subcontractors of the importance of following the contractual requirements for notice when differing site conditions are discovered. As the contractor in that case learned, failure to comply can serve as a waiver of such claims even when the upstream party makes subsequent promises of compensation for the cost and delays associated with the differing conditions.

JEM Contracting (“JEM”) entered into contracts with two Wyoming counties to perform construction services to improve 3.6 miles of a road which traveled through both counties. The counties hired Morrison-Maierle, Inc. (“MMI”) to provide engineering services and serve as the owner’s representative on the project. There was no direct contractual relationship between JEM and MMI.

JEM began work on June 21, 2010. That same day JEM verbally reported to MMI’s on-site representative that it had discovered a differing site condition that would increase time and costs due to the additional work required to pulverize the existing road. JEM’s contract included a provision regarding the procedure for asserting differing conditions claims:

Contractor shall notify the [counties] and [MMI] in writing about differing subsurface or physical conditions within 5 days of discovery and before disturbing the subsurface as stated above. No claim for an adjustment in the contract price or contract times … will be valid for differing subsurface or physical conditions if procedures of this paragraph 4.03 are not followed.

(Emphasis added).

JEM did not provide written notice of the differing condition until 18 days later, on July 9. The two parties met that same day to discuss the issue. JEM alleged in court that at this meeting MMI told JEM that it would be paid for the increased costs if JEM could find savings on the remainder of the project so that it could complete the work within the contract price. When JEM later submitted its claim formally, however, both MMI and the counties rejected it. JEM brought suit against both shortly thereafter.

JEM alleged that it had relied on MMI’s statements to its detriment and that it was induced to continue working due to these statements. The trial court rejected JEM’s arguments due to JEM’s inability to show harm from MMI’s representations because JEM’s contract required it to continue performance during a dispute. JEM appealed and eventually the matter arrived before the Wyoming Supreme Court. Wyoming’s highest court initially noted that the lower court had failed to fully consider the types of harms that could have resulted from MMI’s representations – namely the reduced profit JEM suffering in cutting other areas of work in order to stay within the contract price. Even still, the court said, JEM had clearly failed to assert its claim in writing within the five days required by Paragraph 4.03. The Wyoming Supreme Court found that JEM’s inability to prove that MMI’s representations on July 9 caused JEM any harm was irrelevant, as JEM had already waived its right to such claims when the five day time limit expired.

Differing conditions are common on projects, as are exchanges like the one that occurred between JEM and MMI on June 21, 2010. JEM likely had good intentions for not following up its verbal notice with a letter, perhaps because it did not want to ‘rock the boat’ early on in its performance of work. However, as this case showed, once a dispute arises good intentions are a poor substitute for compliance with the requirements of the contract.

via Talk is cheap – promises to pay are a poor substitute for adherence to contractual notice provisions – Lexology.

Compliance with Contractual Notice Provisions

Jose A. Aquino – February 15, 2013

A recent decision of New York City Office Of Administrative Trials And Hearings (“OATH”) highlights the significance of compliance with each and every provision of a construction contract. Ferreira Construction Co., Inc. v. Dep’t of Transportation, OATH Index No. 1619/12 (Nov. 16, 2012), involved a public contract to reconstruct a pedestrian bridge in Manhattan at East 78th Street and the FDR Drive. The New York City Department of Transportation (“DOT”) contract contained a contractor initiated value engineering change (“CIVEC”) provision that gave the contractor an incentive to propose innovations by allowing for an award to the contractor of 50% of the cost savings if the proposal was accepted by DOT. The dispute concerned the application of the CIVEC clause. The contractor claimed that its accepted proposal under the CIVEC clause saved DOT $252,320.50, and that it was entitled to 50% of the savings of $126,160.25. DOT claimed that the proposal saved the agency only $93,011.50, and that the contractor was entitled to only $46,505.75 additional compensation.

The Contract Dispute Resolution Board (“CDRB”) dismissed the contractor’s CIVEC claim on three independent grounds: (1) the contractor’s claim was time-barred because the contractor did not file its notice of dispute within 30 days of the determination with which it disagreed, as required by the contract and New York City Procurement Policy Board Rules (“PPB Rules”); (2) the claim was waived when the contractor submitted a request for an extension of time without reserving the claim as required by the contract; and (3) the CIVEC claim must be denied on the merits because the contractor’s method of calculating the cost savings was erroneous and DOT’s calculation was correct.

The CDRB held that the time provided for in the contract and the PPB Rules to submit a written notice of dispute to the agency head may not be overlooked. The contract and PPB Rule §4-09(d)(1) required the contractor to submit the notice of dispute to the agency head “within thirty days of receiving written notice of the determination or action that is the subject of the dispute.” The contractor’s failure to do so mandated dismissal of the its CIVEC claim. The CDRB further held that discussions between DOT and the contractor regarding the dispute did not toll the 30-day period.

The CDRB also ruled that even if the contractor’s CIVEC claim was not time-barred, it was waived it when the contractor applied for extension of time and failed to reserve the disputed claim. The contract required the contractor to reserve any potential claims in the application for an extension of time and specifically provided that failure to reserve a claim constituted a waiver. The contractor expressly reserved a number of other claims, but did not mention the CIVEC claim on its time extension application. The CDRB noted that “New York courts have consistently enforced waiver of claims in connection with extensions of time,” and held that the contractor’s failure to identify and reserve its CIVEC claim in its time extension application was a waiver of the claim.

The CDRB also ruled that that CIVEC claim could be dismissed solely on the merits because the contractor’s calculations were wrong. Notwithstanding that it is always important to know your math, the CDRB’s decision is a reminder that under New York law contractual notice provisions are regularly enforced to the detriment of contractors and subcontractors.

via Compliance with contractual notice provisions – Lexology.