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Why are Contractual Claim Procedures So Important?

By Bruce Jervis

 

Maybe it’s the relentless lawyer advertising on television -- if you’ve been wronged, I’ve got a remedy. Most in our society are keenly aware they have rights. Few pause to consider the source of these rights or the distinctions among legal claims. Take, for instance, the distinction between negligence-based tort claims and claims under a contract.

 

A Kentucky contractor recently learned this is more than an arcane, lawyerly distinction. It has practical ramifications. The contractor, having encountered unanticipated bedrock, sued the project owner for negligent misrepresentation of the site conditions. The negligence claim was dismissed. The contractor’s recourse against the owner was defined by the terms of the written construction contract.

 

What are the practical ramifications of this distinction? If the contract defines the remedies, the contract can determine the process and procedure for pursuing those remedies. And construction contracts are profuse with claim procedures. Examples include timely written notice of claim, itemization of costs, and mandatory submission of claims to mediation. Failure to comply can ruin an otherwise valid claim. If that happens, don’t bother calling the guy on TV for a tort claim.

 

Are personnel in your organization aware of the significance of contractual claim procedures? What practices do you have in place to ensure compliance? Are personnel aware that noncompliance may be fatal to a claim, that there is no second bite at the apple? I invite your comments.

 

COMMENTS

Why did this situation go to law suit? Where was the communication between Owner and Contractor, or Consultant acting on behalf of the Owner? Seems like an obvious additional cost to the project that can usually be resolved if the contracting parties are talking. It's only fair if additional work is encountered, and was unforeseen, that the work be paid for at an agreed price. If an agreement cannot be reached, then the work should not be performed. If the work is performed prior to reaching an agreement for price and scope, that's foolish for both contracting parties. That's the value of having someone, a Consultant or Owner's Rep, paying attention to the project on behalf of the Owner. Neither contracting party should expect something for nothing. The Contractor is trying to make money, and the Owner is trying to get something done, but the fair thing is to pay for it.
Posted by: Trent Wellott, CCS, CSI - Friday, April 19, 2013 11:07 AM