Tuesday, January 17, 2017

Quick Construction Contract Tips: Notice Provisions

Many in the construction industry are concerned about two things in the contract above all else:  how much will I get paid and when.  But while very important, those things only matter IF you will get paid.   An often overlooked provision is the notice provision of the contract.

Sometimes tucked away in terms and conditions, the notice provision can be crucial to getting paid.  More and more construction contracts will require written notice of claims within a certain number of days and submitted by a certain method (i.e. e-mail, facsimile, certified mail, etc.).  When it comes to payment, notice can be important in two areas.   First, if there is a change order for which you are seeking payment, the contract may require you to serve written notice of the conditions giving rise to the claims before you can request payment.  Second, if you are not paid, that gives rise to a claim for non-payment.  If the contract requires written notice of such a claim, and you do not present the written notice, it may be deemed a failure of a "condition precedent" and severely restrict or eliminate your ability to pursue the payment through Court.

Some Courts in New York will "strictly construe" notice provisions and not allow the claims for payment where the notice provision was not fully complied with.  So, the lesson to learn:   read the notice provision and negotiate it.   Make sure that the time period is reasonable.  24 hours notice may not be reasonable.   Likewise, 2 days notice may not be reasonable if the condition manifests on a Friday afternoon and the foreman doesn't report it to the office until Monday afternoon.  More than 2 days will have passed before the office is even aware of the condition.   Therefore, think notices through before signing the contract.  Make sure the period is reasonable and realistic and make sure field supervisors know the requirements so that they can immediately report to the office.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.   His practice concentrates on construction law including contract drafting and review.

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