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4 Step 3: Fulfill Pre-Claim Requirements and Notice Requirements

      Construction contracts often prescribe both pre-claim requirements and formal claim notice requirements. In addition, most contracts require that notice be issued in writing and transmitted via an accepted method, such as certified mail or registered mail, archaic as that may seem. Contractor pre-claim notice requirements allow the respondent the opportunity to render a decision on the issue before it is elevated to a formal “claim” status. Formal claim notice generally comes after the respondent has rejected all or a portion of claimant's change request.

      It is common for claimants to ignore or otherwise fail to adhere to pre-claim notice requirements and/or formal claim notice requirements. Because lack of notice defenses can cause draconian results for claimants, state and federal courts have ample case law on this subject. States vary on their treatment of respondent's “failure to provide proper notice” defense. A minority of states interpret notice provisions strictly and often time bar delinquent claims, regardless of merit. Most states and federal courts take a more liberal “fairness” approach and often accept claimant defenses that can demonstrate that the respondent:

      Claimants that fail to adhere to strict notice provisions and whose claims are rejected by respondents based on a lack of notice should contact a qualified construction attorney to discuss available defenses.

Constructive notice means that the respondent knew or should have known about the claim event. This may include verbal notice, discussions at a meeting(s), or superior knowledge. Second, claimants can assert a lack of prejudice defense if the respondent was not prejudiced by lack of timely notice. In other words, the respondent would not have acted differently even if the claimant had issued proper notice, e.g., the claimed work had to get done for the project to move forward and there was no alternative. Third, a waiver of notice defense may occur when the respondent did not previously enforce strict notice requirements as a condition precedent for the negotiation of claims.

I. Pre-Claim Requirements

      Standard contract agreements contemplate various types of claims that frequently arise on construction projects and for certain categories of claims these contract forms include pre-claim provisions that allow respondents an opportunity to review the impact and, if so determined, issue a change in the claimant's contract sum and/or contract time before the claimant initiates dispute resolution. Thus, it is important for the claimant to define the nature of a potential claim so it can evaluate whether any pre-claim steps are necessary before it invokes the dispute resolution process. Below is a sample of impacts that often require a pre-claim notice. Each of the examples below is based on a contractor being the claimant and an owner being the respondent and these two parties have entered into a standard contract form and the owner is responsible for the design on the project.

      A. Design Issues

      1. Differing Site Conditions

      A differing site condition occurs when the contractor discovers subsurface or concealed conditions that differ materially from those indicated in the contract documents (Type 1 Differing Site Condition) or materially different from conditions ordinarily encountered in work in the location of the project (Type 2 Differing Site Condition), and this differing condition will cause an increase in the contractor's cost and/or time to perform the work. Standard contracts typically require the contractor to allow the owner the opportunity to decide on whether to authorize a change order to cover resultant impacts. If the contractor does not agree with the owner, it can initiate dispute resolution. The examples below review specific pre-claim requirements.