7 Steps to Withstand Legal Challenges of Construction Claims Made without Formal Notice

Follow these seven steps to prepare claims and withstand legal challenges after failing to provide an owner with formal written notice of a construction claim

Contractors and subcontractors, with their attorney, will be able to prepare their claims to better withstand legal challenges based on the failure to provide formal written notice.
Contractors and subcontractors, with their attorney, will be able to prepare their claims to better withstand legal challenges based on the failure to provide formal written notice.

When construction contractors have a claim case, one of the most important questions to ask right away is when and how did the contractor give notice of the claim to the owner. Notice requirements for construction claims can be a determining factor in the court case. 

The most vocal client advocate of the claim will often tell us, in a lowered voice, something like this: “Well, we did not exactly send them a formal letter or anything like that, but they knew. They know; they are expecting this.” 

The most common reason for not having sent such a formal notice letter is usually a combination of one or more of the following:

  • The claim arose at the beginning of the job, and we did not want to start off on a bad foot
  • We did not want to jeopardize other pending change orders
  • We bid other work to them and did not want to hurt our chances on that work
  • “That is not how we like to do things.” 

The court cases generally fall into two camps: the strict compliance camp and the constructive knowledge/no prejudice camp. 

The strict compliance camp holds that the failure to comply with a formal notice provision may well result in the forfeiture of a contractor’s claim to time and to money. In particular, courts in Indiana, North Carolina, Kansas and Georgia have issued decisions denying claims for the failure to strictly follow claim notice provisions. 

The constructive knowledge/no prejudice camp looks at the situation from a more equitable standpoint. Courts in this camp often ask whether there was some notice to the owner so that the owner should have expected a claim and whether the owner was prejudiced. Courts in Pennsylvania, the Federal Circuit and the Federal Court of Claims have issued opinions applying this equitable approach. 

Having said that there are two camps, each claim will still rise and fall on its own unique set of facts, and within each camp or state there exists cases going the other way. In addition, there is never any certainty on how a court will rule. Courts in some states will tend to enforce notice provisions more strictly in favor of public owners as opposed to private owners or less strictly in favor of subcontractors over general contractors. 

Contractors and subcontractors, along with their attorney, will be able to prepare their claims to better withstand legal challenges based on the failure to provide formal written notice by following the seven steps below. Still, there is no certainty whether the client’s claim could be subject to dismissal on a technicality. And if the owner has competent counsel, the contractor can expect that this notice defense will be routinely advanced in negotiations or with a mediator in order to attempt to discount the value of the claim.

Faced with this potential contractual pitfall, what steps should contractors and subcontractors, along with the construction attorney, take? 

  1. Read the contract closely, with particular attention to the terms as to timing of claim notice periods.
  2. Research the contemporaneous project records — meeting minutes, submittals, emails, charge order requests, etc. — and identify all items that even tangentially mention or relate to the problem.
  3. Prepare a timeline in which the contractual notice period is overlaid atop the dates of the contemporaneous project records where the problem was raised or discussed.
  4. Analyze whether, despite the absence of a formal letter citing to the appropriate contractual term, there is good reason to conclude that the owner had constructive notice of the problem and, therefore, a likely claim.
  5. In connection with that inquiry, consider whether the owner could claim that the lack of prompt formal notice caused it prejudice. In other words, if the owner had known of the problem earlier, could the owner have taken steps to address the problem and mitigate the costs? Or was this the type of problem that could not have been fixed in any way but the way the contractor ultimately did?
  6. Consider whether a more formal notice letter should now be prepared and sent. This letter would cite to, and attempt to bootstrap on, earlier project records, like meeting minutes and emails, and indicate that the letter was being sent to memorialize and consolidate the prior notices.
  7. Research the governing state law of the contract to determine the extent to which its courts enforce and uphold claim notice timing provisions in the construction context.

Where does this leave us? If you want to avoid all the work and cost entailed in the seven steps above — and allow you and your attorney to sleep better at night — when you get the hint of a claim, read the claim notice provision and follow it. Remember a notice letter does not have to be unfriendly. A notice letter can be worded nicely, still make the point and be effective in preserving the claim.

Scott D. Cessar is Member-In-Charge of the Eckert Seamans' Pittsburgh Office, Board of Directors, Chair of the Construction and Alternate Dispute Resolution Groups. His practice covers a broad range of civil litigation with a primary focus on construction law. He has extensive trial and alternative dispute resolution experience representing clients before state and federal courts, arbitration panels and mediators across the country. Scott’s construction law practice encompasses both public and private projects (commercial, heavy/highway, industrial, institutional and residential). Projects include hydroelectric plants, steel mills, bridges and highways, hospitals, office buildings, schools, laboratories, greenhouses, dams, pipelines, gas transmission facilities, water plants, sewer plants, mines, airports, glass furnaces, stadiums, hotels, pipelines, factories and process facilities and environmental remediation sites.