October 2003
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
Last month's column discussed a case in which an appellate court dismissed a claim for extra work because the contractor failed to comply with contractual requirements for written notice of such claims. The contract in question provided that such notice was a condition precedent to the contractor's right to bring an action, and the failure to comply constituted a waiver of such claims. The column noted that where it is clear that the work was performed with knowledge of the owner, some courts, out of a sense of fairness, have held that the notice requirements were waived. The recent case of G. De Vincentis & Son Construction, Inc. v. City of Oneonta illustrates this exception to the general rule requiring strict compliance with notice provisions of the contract.
Background
The firm G. De Vincentis & Son was the successful bidder on the Center Street Reconstruction Project in the City of Oneonta, NY and entered into a contract to complete the reconstruction by Aug. 21, 1998 at a price of $282,016. By letters dated Aug. 7 and Aug. 11, 1998, the contractor informed the city that it had encountered certain conditions requiring work not included in the contract, resulting in changes to water service, extra milling and the installation of new driveway aprons. The contractor requested additional money and an extension of time to complete the work.
The contractor met with the city's engineer and engineering administrator on Aug. 17, 1998 to discuss the changes. On March 19, 1999 the contractor itemized all outstanding extra costs incurred on the project and requested an additional $45,599. On Dec. 16, 1999, the engineer sent a letter to the contractor addressing the claims, agreeing to some of the costs in the sum of $15,497 and denying the others. On April 12, 2000 the contractor again requested payment in full for the extra work.
The contractor commenced an action on Dec. 12, 2000 to recover the amount claimed for extra work. The city, as a defense to the action, claimed that the contractor failed to meet the conditions precedent set forth in the contract for the payment of the extra work. The contractor moved for partial summary judgment and the city cross-moved to dismiss the complaint. The city contended that the engineer's letter of Dec. 16, 1999 was not a partial approval of the contractor's extra work claim, but rather an offer to settle the claim that was rejected by the contractor.
The lower court granted the city's cross-motion and dismissed the complaint on the ground that the contractor failed to comply with the notice and documentation requirements set forth in the contract as conditions precedent. The contractor appealed.
Decision
The appellate court reversed the dismissal of the complaint as it related to the extra work claims. The court noted that the contract contained provisions requiring the contractor to present claims for additional compensation within 10 days. The contract also provided that the engineer was to finally decide all questions relating to the work and that a determination or decision of the engineer was a condition precedent to the right of the contractor to receive payment for the work in question.
The court found, however, that although the contractor did not comply with all of the notice and documentation requirements of the contract, the contract did not explicitly require the contractor to strictly comply with its terms, nor did it include a provision prohibiting estoppel or waiver on the part of the city. According to the court, the contractor raised questions of fact as to whether the city had actual knowledge of the extra work claims and whether, through the conduct of its agents, the city waived its right to strict compliance. The court referred to the letters by the contractor setting forth the extra costs incurred and the participation of the city's engineer in discussions concerning such costs. Because of the issues of fact, the court held that the extra work claims should not have been dismissed.
Conclusion
The contractor in this case won only a partial victory on appeal. Its extra work claims were restored, but the contractor will still have to prove at a trial that the city had actual knowledge of the claims and that, by the acts of its engineer, the city waived strict compliance with the contract requirements. Had the contractor complied with the contractual requirements in the first place, the issue of waiver would have been avoided.
The court was undoubtedly influenced by equitable considerations. There had been correspondence and discussions between the contractor and the city's engineer concerning the extra work claim. It appeared that the city may have had actual knowledge that the contractor was required to perform work outside the scope of its contract and it would be unfair for the city to escape payment for that work because of the contractor's failure to comply with written notice requirements. This case demonstrates that the courts will look at the facts of each case, and, in the interest of fairness, may find exceptions to the general rule of strict enforcement of notice requirements.
As this column noted last monthÑand it is worth repeatingÑcontractors should familiarize themselves with the notice requirements of their contracts. Proper claims procedures will eliminate the risk of an adverse court determination. Contractors should not count on favorable determinations from the courts when they fail to comply with the contractual notice requirements, even though they may occasionally find some relief from a sympathetic court.
About the author: Mr.
Miuccio is a partner in the New York City-based law firm Altieri, Kushner &
Miuccio, P.C. and legal counsel to the Construction Industry Council of
Westchester and Hudson Valley, Inc. Robert Mark Wasko, senior associate with
the firm, assisted in the preparation of this article.