PCCA Journal 4th Quarter 2013 - page 9

PCCA Journal|4
th
Quarter 2013
9
Notice on Notice: The Consequences
of Insufficient Notice Can Be Severe
By Matthew Straub
Legal Watch
Continued on page 10
D
oes it really matter if a contractor’s notice of
a claim was communicated to an owner a
few days late or was not written as required
by the contract? Unfortunately, no universal
answers exist to these questions. Rather, the
answers depend on a host of factors. The factors range from
the terms of the notice provision to the state in which the
project is located. This article discusses how the law treats
notice provisions in contracts, the consequences of insuffi-
cient notice, and best practices for avoiding the consequences
of improper or untimely notice.
Notice provisions are typically designed to give an up-
stream party (such as an owner) as much information about
a new claim as early as possible. This gives the owner a
chance to investigate and consider all options to minimize
the impact of a claim. It also affords the owner an opportu-
nity to determine ways to finance or fund the new claim. A
notice provision also deters the practice of many sloppy (or
failing) contractors and subcontractors: waiting until the end
of the project to unload a batch of change order requests to
offset losses on the project.
On public projects, these notice provisions are rarely nego-
tiable and often require near-impossible amounts of informa-
tion within a laughably short timeframe. Therefore, public
projects typically require routine vigilance of notice time
periods.
Understanding how the law treats improper notice will
help contractors to minimize risk associated with notice and
protect interests on future projects. Generally, courts have ap-
plied one of two standards to notice provisions: the prejudice
standard or the strict-compliance standard.
The Prejudice Standard
The prejudice standard provides that failure to precisely
follow contractual claims procedures will not defeat the
contractor’s right to compensation unless that procedural
error causes prejudice to the owner. Prejudice exists when
an upstream party’s legal rights and obligations are substan-
tially affected by the claimant’s late notice. For example, if an
engineer’s error does not permit the application of a speci-
fied product and the contractor selects an alternative product
without providing notice, the owner is prejudiced because it
may have been able to select a different product or method
from that chosen by the contractor.
The owner’s knowledge of a claim will likely play a role in
determining whether it has been prejudiced. An owner with
knowledge of a claim is likely an owner without prejudice.
An example of a court applying the prejudice standard is
found in P
aragon Const. Co. v. Department of Public Works
,
2013 WL 1943953 (Conn.Super, Apr. 19, 2013). In that case,
the contractor performed work for a correctional center. It
sued Connecticut’s Department of Public Works for cost
overruns and construction delays. The Department of Public
Works countered that the contract required the contractor to
make a claim within seven days and that the contractor gave
late notice (15 days) and therefore was barred from assert-
ing its claims. The Superior Court disagreed, finding that the
contractor only had to substantially comply with the contract
provision and highlighting the fact that that the Department
of Public Works knew about the claims and made no claim of
prejudice from the late notice.
The Strict-Compliance Standard
The strict-compliance standard requires that a claimant strict-
ly comply with the notice provisions in the contract. Failure
to strictly adhere to these standards results in a waiver of
such claims.
The strict-compliance standard is illustrated in
Dan Nelson
Construction v. Nodland & Dickson
, 2000 ND 61, 608 N.W.2d
267 (2000). In that North Dakota case, a contractor entered
a contract with the State of Wyoming to reclaim a portion of
an open-pit uranium mine. The prime contract contained the
following provisions:
“CONTRACTOR shall promptly notify OWNER and ENGI-
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