By: Alexander A. Miuccio Gregory J. Spaun Published: January 2018

Extension Agreement May Override Untimely Notice of Claim

Public Authorities Law Section 1744 provides for a three-month time limit after a claim accrues to file a contractor’s claim for monies due under a contract. The running of the three-month period for filing a notice of claim begins with the date that a construction project is substantially completed.

In the recent case of AMCC Corp. v New York City School Construction Authority, the court ruled on whether an agreement between the parties to extend the time to serve a notice of claim applies to the contractor’s untimely claim under Public Authorities Law Section 1744.

Background

In February of 2001, AMCC entered into a design-build contract with the SCA to construct a school in Queens. Over the course of construction, the SCA instructed AMCC to complete extra work, resulting in additional costs. AMCC, in turn, submitted change orders between October 18, 2001, and August 14, 2003, in order to recoup those increased costs. The SCA agreed to some, but not all, of those proposed increases. AMCC then executed a certificate of substantial completion on September 6, 2003, and it served a notice of claim on November 21, 2003 which itemized the claims for extra work and/or delays.

Between August of 2004 and August of 2011, the parties entered into a series of agreements extending the “time for [AMCC] to commence legal proceedings and/or serve notices of claim against the [SCA].” The last agreement in this series specified that, “[o]ther than the extension of time to commence an action and/or serve notices of claim and the raising of any notice of claim defenses, the parties hereto do not waive any rights or remedies that they may have under applicable laws.” Notably, the agreement made no distinction between claims that were already untimely when the notice of claim was served on November 21, 2003, and claims that were not.

AMCC sued the SCA to recover $4,838,245, which represented the unpaid portion of the contract price plus all of its unresolved change orders. The SCA moved to dismiss specific portions of the complaint, arguing that some of AMCC’s claims were untimely because they accrued when it submitted the disputed change orders—all of which preceded the notice of claim by more than three months. AMCC opposed, arguing that its claims were timely because they accrued on the date of substantial completion.

Decision

The trial court dismissed the AMCC claims which the SCA argued were untimely, citing the requirement under Section 1744 of the Public Authorities Law to serve a notice of claim within three months after the claim’s accrual. The appellate court reversed, finding that the parties’ agreement to extend AMCC’s time to serve a Notice of Claim and commence an action failed to distinguish between timely and untimely claims.  Accordingly, the extension agreement was subject to more than one interpretation “as they may have intended to apply [AMCC’s] untimely claims.”  In light of this ambiguity, the court ruled that the lower court improperly dismissed AMCC’s untimely claims.  The appellate court further relied on well settled case law that absent a strong countervailing public policy courts are bound to enforce whatever agreement the statutory or constitutional rights. 

Comment

It has long been a principle of contract law that parties are free to contract as they see fit, and the courts are bound to enforce the agreement as written, absent a violation of public policy, bad faith or unconscionability.  In this case, the appellate court held that the extension agreement may be interpreted as the parties’ intent to apply the contractor’s untimely claims as well as its timely claims, thereby overriding the short statutory three-month limitation for serving a notice of claim. The appellate court sent the matter back to the trial court to take evidence as to the parties’ intent on this issue. 

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