LAW: The Contractor's Side

Aug. 6, 2001
Contractors need to be aware that DOTs are relying more frequently on the failure to give notice as a means of denying requests

Contractors need to be aware that DOTs are relying more frequently on the failure to give notice as a means of denying requests for compensation.

Contractors need to be aware that DOTs are relying more frequently on the failure to give notice as a means of denying requests

Contractors need to be aware that DOTs are relying more frequently on the failure to give notice as a means of denying requests for compensation. Huff Enterprises Inc. v. Triborough Bridge and Tunnel Authority, 595 N.Y.S.2d 178 (A.D. 1 Dept. 1993), a 1983 New York case, illustrates the problem. Huff Enterprises entered a contract with the Triborough Bridge and Tunnel Authority (Authority) for the construction of office facilities. The contract contained a standard requirement that written notice of delay be given to the owner. Full completion of the project was delayed more than two years past the originally scheduled project completion date. Huff asserted the delay was largely attributable to the Authority’s revision of construction plans, which required Huff to perform extra work. Huff failed to provide written notice at the start of the delay. After completion, Huff sued the Authority, seeking to recover delay damages as well as compensation for extra work.

No waiver

Before the New York Supreme Court, the Authority argued that because Huff failed to comply with the written notice provision of the contract, it should not be permitted to recover delay damages.

Huff disagreed, claiming that the Authority repeatedly and deliberately ignored, and therefore waived, the contractual notice requirement. Further, the Authority’s field representative had verbally told Huff that any claim for delay damages should be submitted along with other claims at the end of the project. According to Huff, it was established practice between the parties to bypass the strict mandates of the contract by not making notice of each item causing delay. The trial court denied the Authority’s motion for summary judgment on the portion of Huff’s claim seeking delay damages. The court found that a trial was necessary to determine whether the Authority had waived its reliance on the notice provision based on knowledge through its on-site agents.

The Authority appealed the denial of its motion for summary judgment. On appeal, the New York State Supreme Court, Appellate Division, reversed the Supreme Court’s denial of summary judgment to the Authority, granted judgment to the Authority and dismissed the delay damage claims because the decision "did not take proper account of the clear and unambiguous terms of the subject agreement." The appeals court referred to three key clauses in the contract. The first required Huff to give 10 days written notice to the engineer of any condition causing delay and stated that failure to strictly comply with the provision constituted a waiver of claims for damages and could result in a denial of any extension of time. The second clause required Huff to submit with its final requisition for payment a verified statement which included all alleged claims. The third clause stated that the Authority would not be prevented from seeking damages from Huff because of any approval given to Huff either before or after project completion and final acceptance.

The Appellate Division warned that contract notice requirements merit strict enforcement. The court noted that while failure to comply has been excused on occasion, it is only done in cases where extensive records of timely written correspondence between the parties addressing the disputed subject matter exists. In this case, the court held there simply was no record of such correspondence. The fact that the Authority permitted extra work claims didn’t prevent it from demanding compliance with the notice requirement for delay claims, since the claims the Authority sought to dismiss related only to delay damages, not to extra work.

Comply with contract

Public owners frequently argue contract clauses that require written notice of potential claims for delay, changes and differing site conditions allow the public owner to mitigate or eliminate impacts, and to keep contemporaneous records of the cause, effect and costs associated with an issue. Where contractors fail to notify public owners and later submit claims, courts may presume the owner has been unfairly prejudiced. Strict compliance with notice requirements is essential. If the costs of the issue cannot be immediately quantified, contractors should indicate so in their written notice. Finally, written confirmation of verbal instructions to contractors serves to memorialize the owner’s knowledge of the events as they occur.

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