In the last post, I discussed a Montana case in which the contractor failed to follow the notice provisions contained in the contract and lost its claim because of it. But, sometimes a court will excuse your failure to follow the technical requirements of the contract. In a recent Nebraska case, the court excused a subcontractor’s failure to follow the notice provisions and allowed it proceed with its claim.
The case of Paul Reed Construction & Supplyl v. Acron involved a road construction project in western Nebraska. Acron was hired to crush asphalt and concrete highway surface material. The contract contained the typical change order language: no changes in the work shall be agreed upon in writing; any claim for adjustment shall be made in writing within 10 days; and Failure to provide notice of a claim within 10 days shall be deemed a waiver When Acron arrived on site, it had to wait nearly a month to start crushing. When material was available to crush, it was often too big and had to be broken down. To its credit, throughout these problems, Acron e-mailed Paul Reed’s Chief Operating Officer notifying him of the problems and delays. Paul Reed acknowledged the problems and delays, but never issued any written change orders. Acron submitted invoices seeking additional compensation, in excess of $250,000, all of which were rejected by Paul Reed.
In the ensuing lawsuit, Paul Reed claimed that Acron waived its claim because it did not have a written change order for the additional work. Acron argued that Paul Reed’s request for the work and refusal to provide written change orders should not allow it to avoid paying Acron.
The court agreed with Acron, finding that the parties to a contract may avoid a written change order provision where their words, acts or conduct amount to a waiver or modification of the provision. Specifically, the court found that Paul Reed knew about the additional work Acron was performing and by its actions and inactions approved it. The court’s opinion references a number of e-mails from Acron to Paul Reed and it appears that these e-mails saved Acron from the fate of the Montana contractor in the last post.
Take Away: While it is best to comply with the notice requirements, , well documented requests for approval of additional work may support a contractor’s claim that the upstream contractor waived technical compliance with the contract.