The case involved a sewer replacement project that required excavation and removal of a large amount of rock. The geotechnical report provided by the owner did not warn of any unusual conditions with underlying bedrock at the site that would affect construction. The contract required the contractor to provide notice to the owner of a differing site condition within 10 days of identifying the condition necessitating a change in the work with a formal written claim to follow within 30 days. The contract required the formal written claim to provide specific information regarding the nature of the claim, the facts giving rise to the claim, the date of discovery of the claim, and detailed pricing for the claim, as well as other supporting documentation.
When it began work in 2016, the contractor discovered that the layer of bedrock beneath the site was at a shallower depth than shown in the geotechnical report and other owner-provided site information. The contractor claimed it provided notice of this issue during weekly meetings with the owner, but the contractor did not send written notice to the owner until February 2018, after the project had achieved substantial completion. The contractor did not follow up with a formal written claim, as required under the contract, until nine months later in November 2018. After the owner denied the claim, the contractor filed suit. The owner sought summary judgment arguing that the contractor's formal written claim was untimely under the parties' contract. The trial court agreed, and the contractor appealed.
The appellate court upheld the trial court's decision finding it was undisputed that the contractor failed to make any formal written claim within 30 days of providing notice of such claim, as required under the contract. The court was not persuaded by the contractor's argument that the 30-day time limit for submission of a formal written claim was unreasonable, especially where the contractor admitted knowledge of the claim as early as 2016 but did not submit a formal written claim until two years later. Per the court, the contractor's failure to comply with the contractual requirement constituted a waiver of its claims.
Takeaway from TSI Construction
Contractual notice requirements in change order clauses can be important to preserving claims, and, in certain jurisdictions, failure to comply with the notice requirements may result in waiver of an otherwise valid claim. Often, when a change occurs, the impacts are ongoing or not easily quantifiable, so compliance with certain notice requirements may be difficult. However, such difficulties may not relieve a contractor from fulfilling the notice obligation. In such circumstances, utilizing best efforts at compliance, which may require consultation with counsel, may be beneficial.
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