Contractors are well-advised to familiarize themselves with the various time limitations periods in their construction contracts, including those setting forth the time within which to bring a claim for delay damages. At times the limitations period can be short. Questions also arise as to when the limitations period begins to run and whether the owner has waived its right to enforce the contractual limitations period.
In the recent case of Dart Mechanical Corp. v City of New York, an appellate court upheld the enforcement of a six-month time limitations period and resolved the questions of when the delay claim accrued and whether the public owner’s conduct showed an intent to waive the contractual limitations period.
In June of 2001, Dart was awarded a contract for the installation of HVAC systems for the New York City Department of Sanitation. Under the original project schedule, Dart was to have commenced its work on February 21, 2002 and be substantially complete by December 29, 2004. The contract allowed Dart to apply for an extension of time to complete performance; otherwise, failure to meet the project deadlines would leave Dart subject to liquidated damages.
The contract further required Dart to submit to the Commissioner of Sanitation a detailed verified statement of a delay claim within 45 days of the damages resulting from the delay, and to continue to supply such statements every 30 days thereafter “for as long as such damages are incurred”. Any claim for breach of contract not otherwise subject to one of the dispute resolution procedures had to be commenced within six months of the issuance of the certificate of substantial completion, unless it arose out of events occurring after that date.
Although Dart was supposed to commence its work on February 21, 2002, for various reasons it was not given full access to the site until March of 2003. Further delay was occasioned by problems with the electrical work and the fire alarm system. As a result, Dart was not substantially complete until December 6, 2007, 952 days after the originally scheduled completion date. Dart claimed delay damages of $2,598,843.
In March of 2010, Dart submitted its substantial completion payment requisition, together with a time extension request and a particularized statement of its delay damages claim. The City denied the delay claim, claiming that it had not been preserved under the Contract’s notice provisions. The City ultimately approved Dart's payment requisition for substantial completion in early February 2011. Dart commenced this action more than a year later, on March 30, 2012, and sought compensation for the damages it incurred as a result of the project’s delay. The trial court dismissed Dart’s lawsuit for Dart’s failure to file the delay claim within the six month time limit required under the contract. Dart appealed.
Dart argued that the claim was timely because the City did not finish processing its substantial completion payment requisition until early 2011 and no suit could have been brought prior to that time because it would not have been ripe. Dart also claimed that the City’s request for additional information relating to the substantial completion payment application without requesting more information relating to the delay claim operated as a waiver of its objection to the timeliness of the delay claim.
The appellate court rejected both arguments, first noting that the six month limitations period was not unreasonably short. On the question of the time limits within which to bring the claim, the appellate court held that the period to submit the delay claim began to run upon the engineer’s issuance of the certificate of substantial completion. Further, as the claim for payment and the claim for delay damages were separate, the limitations period for the delay claim did not conflict with the limitations period for a payment claim and Dart could have submitted its delay claim to the City prior to its substantial completion payment application.
As to the waiver argument, the appellate court relied on well-established law that a waiver must be supported by evidence of a clear manifestation of an intent to relinquish rights under the contract. There was no such clear manifestation by the City under the circumstances of this case.
The courts continue to enforce agreed-upon contractual time limitations. Contractors should provide notices as soon as they have information relating to potential claims, rather than wait for all of the information to fall in line. An early claim submission can always be supplemented with additional information as it becomes available. A late claim, however, is dead on arrival and cannot be resurrected.