Construction Contract Notice of Claim Provisions are Generally Strictly Enforced in Ohio
Strict enforcement of notice provisions in construction contracts can be devastating to a contractor’s claims arising during construction. Owners and higher tier contractors routinely raise alleged failures of strict compliance with notice provisions in their attempts to defeat contractor claims which may otherwise have great merit. Typically, in cases where the contractor did not provide the exact notice required, the contractor makes two arguments: (1) the owner had actual notice and therefore was not prejudiced by the lack of formal notice; and (2) the owner “waived” the notice requirement. In this article, I will address the first argument under Ohio law. I will address the second argument in a subsequent article.
A recent article in the American Bar Association’s publication, Construction Lawyer (Volume 32, Number 1, Winter 2012), well addressed this matter generally, noting that in federal cases, the courts do not always strictly enforce notice provisions, “where ‘fairness demands.’” The author, Douglas S. Oles, noted that federal courts have refused to strictly enforce these provisions where, e.g., the contracting officer had actual or constructive notice of the facts giving rise to the claim or where the notice would have been useless. As Mr. Oles further noted, some states follow this rule and others strictly enforce the notice requirements. He includes Ohio among the states that decline to strictly enforce such notice provisions. That conclusion respecting Ohio law merits a closer analysis.
As a general matter, Ohio law is quite clear: absent waiver, courts will enforce the express terms of contracts as written, even if the result is harsh on one of the parties. In Dugan & Meyers Construction Co., Inc., v. Ohio Department of Administrative Services, 2007 -Ohio- 1687, 113, Ohio St. 3d 226, 864 N.E.2d 68, e.g., in considering a contractor’s substantial delay claim, the Ohio Supreme Court held that the contractor’s failure to request an extension of time in writing was conclusive that the contractor was not entitled to an extension. Notwithstanding the millions of dollars in claimed delay damages and evidence that the owner clearly knew of the delays on the project due to errors in the owner’s plans and specifications, the failure to request an extension of time in writing was fatal to the contractor’s claim. Similarly, in a more recent case, where a subcontractor was demanding damages for labor inefficiencies and loss of productivity, an Ohio appellate court held that the claim was completely barred by a subcontract clause requiring written notice of claim that included “a brief statement of the impact to the [subcontractor’s] Work.” Maghie & Savage, Inc. v. P.J. Dick Inc. (Franklin Co.), 2009 -Ohio- 2164. Since the subcontractor did not refer to labor inefficiencies or loss of productivity in its written notice, it was thereafter barred from making a claim for those kinds of damages.
In the older case relied upon in Mr. Oles’ article (Roger J. Au & Son, Inc. v. Northeast Ohio Regional Sewer District (Cuyahoga Co. 1986), 29 Ohio App.3d 284, 504 N.E.2d 1209), the court held that since the owner had ample actual or constructive notice of differing site conditions, largely from written communications from the contractor, the contractor’s claims were not barred despite a lack of a more formal and explicit written notice. Moreover, the court went on to explain that it was significant that the contract also gave the contractor up until the time of final payment to submit its claim, i.e., the stated basis for additional compensation and the amount of compensation the contractor was claiming. The clear implication is that the result would have been different if the contract had required a prompt submittal of the claim. Most construction contracts of significance today require notice not only of the facts giving rise to the claim, but information about the claim itself. Under the current state of Ohio law, a contractor acts at his or her peril if he or she does not comply with the exact terms of the notice required.
Thus, the first argument that a contractor usually makes in response to a claim that it failed to comply strictly with written notice provisions generally does not stand up in Ohio. The fact that the owner has actual or constructive notice of the problems or claims generally will not relieve the contractor from responsibility for providing the required written notice.
I do not address in this article the second key argument contractors often make in response to a failure of notice defense, i.e., that the owner waived the notice provision. This is a very different argument than the one addressed here and is heavily dependent on the facts of the situation. That will be the subject of my next article. Suffice it to say here, contractors should take the notice provisions in their contracts very seriously. The result of the enforcement of such provisions to deny claims can be draconian.
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