Construction contracts usually contain notice-of-claim provisions. The contractor must, within a stated period of time, notify the project owner in writing of any occurrence that may give rise to a claim for additional compensation under the contract. The policy behind these requirements is sound. Owners should have the opportunity to respond to problems as promptly as possible while options are available and costs can be mitigated.

Notice-of-claim provisions also have teeth. The contractor’s failure to give timely written notice of a claim occurrence will constitute a waiver of the right to any additional compensation under the contract. Courts take two approaches to this language. Sometimes, such as in a recent case from New York, failure to give proper formal notice is a bar to additional compensation even if the project owner had actual knowledge of the occurrence. The requirement is strictly enforced.

Other times, such as in a recent decision by the Wyoming Supreme Court, the requirement is interpreted in a more permissive manner. Some notice is sufficient and strict compliance is not mandated. A contractor was allowed to pursue a claim for extra work despite the failure to break down the cost elements of its claim.

The third case this week involved a project owner’s waiver of a contractual requirement for advance written change orders. A pattern of oral directives for extra work, and payment for some of that work, reasonably led the contractor to believe that the change order process would not be followed.