Most contracts provide that before an extra work claim will be recognized, the contractor must give timely notice of its claim. The primary purpose for the notice is to provide the owner with prompt notice so that he can make an informed decision regarding how to deal with the cost of the extra work.
In the recent case of Phoenix Signal and Electric Corporation v New York State Thruway Authority, the Court rejected the contractor’s extra work claim because of its failure to comply with the contract’s notice provisions.
In January 2005, Phoenix entered into a contract with the Thruway Authority to install CCTV cameras and overhead message signs along the Thruway. The contract required the work to be performed in accordance with the project's specific plans and the DOT's "Standard Specifications." The contract also permitted Phoenix to request compensation for extra work exceeding the contract's requirements.
During the project, Phoenix claimed that three situations arose which required Phoenix to perform extra work. Specifically, (1) Phoenix was required to modify the preparation of concrete foundations by using a two-stage concrete pour; (2) Phoenix's subcontractor encountered rock while drilling certain foundation holes; and (3) a design error caused by the unexpected presence of a drainage catch basin required Phoenix to use custom-formed, rather than prefabricated concrete median barriers.
In July of 2005, Phoenix submitted notice forms called force account daily reports to the project's engineer-in-charge for the drilling claim. In August of 2006, Phoenix also submitted force account daily reports pertaining to the two-stage pour and barrier claims. The Thruway Authority denied all three claims, and Phoenix sued for breach of contract.
The appellate court determined that Phoenix provided timely notice of the drilling claim, but failed to provide timely written notice for the two-stage pour and barrier claims. The Court found that the contract required Phoenix to notify the project's chief engineer in writing within 10 days of any extra work claim, with copies to other specified officers. The contract further required Phoenix to submit force account reports to the chief engineer on a daily basis while the extra work was being performed, in addition to certain periodic summary reports, and to have the force account reports signed by the chief engineer.
The Court noted that where a notice provision is expressly agreed upon by the contracting parties, such condition "must be literally performed", and that "no action for breach of contract lies where the party seeking to enforce the contract has failed to perform a specified condition precedent". The Court held that because Phoenix did not provide initial written notice and summary reports for the two-stage pour and barrier claims, did not submit force account reports until more than a year after the work was performed, and did not have those force account reports signed by the project’s chief engineer, Phoenix’s failure to comply constituted a waiver of its extra work claims.
As this case demonstrates, Courts will not hesitate to strictly enforce contractual written notice provisions and other preconditions to the making of an extra work claim. Contractors are once again cautioned to be thoroughly familiar with notice provisions and other pre-conditions set forth in the contract. Failure to comply with such preconditions may result in the waiver of an otherwise valid, and substantial, claim.