After final payment was made under its contract, a utility construction contractor submitted a written request for additional payment to the project owner seeking payment for extra work it performed as well as increased costs due to delays and disruptions during the project. When the owner refused to pay, the contractor filed a breach of contract complaint alleging that the owner failed to provide plans showing the location of underground facilities and was obligated to pay for extra work caused by differing site conditions. The work in question resulted from 122 incidents where other utility lines or structures were damaged because they were unmarked on the construction plans. The trial court found against the contractor – concluding that the risk of liability with respect to underground utilities was allocated by contract to the contractor. Moreover, the contractor claim was barred because it was untimely made. This was reversed on appeal with the court holding that the contract allowed for differing site conditions claims and did not assign all risk to the contractor, and that the written notice requirement was not fatal since the owner had actual notice of the claims through its onsite representative who documented each event as it occurred. J. F. Allen Corporation v. The Sanitary Board of the City of Charleston, WV, 785 S.E..2d 627 (W.VA. 2016).
The court cited earlier case precedent for the proposition that contract provisions providing for timely written notice of changes or claims can be amended, waived or abrogated by the conduct of the parties. Here, the contractor had sufficient allegations in its complaint concerning actual knowledge and action by the owner, that the complaint should not have been dismissed. The court cited a history of actions by the owner on this project in which the owner did not insist on adherence to the formal contractual requirements and even instances where the owner, in contravention to the formal requirements of the contract, instructed the contractor to bill in a manner different than called for by the contract and to perform work not specifically called for by the contract.
With regard to the extra work that was not formally required until after contract completion, the court found that the city had immediate, actual notice of the extra work as it was being performed and even directed the contractor to perform with the attendant expectation that the contractor would receive additional compensation. Consequently, the court found that the allegations in the complaint were adequate to support a claim for damages. On remand to the trial court, the contractor will have an opportunity for a trial on the merits but that whether it met the requirements of the contract, and whether the owner breached its obligations under the contract and whether elements of the contract were waived or amended by the parties are all questions of fact that will have to be resolved by the trier of fact.
Comment: This result is somewhat surprising in that “final payment” had already been made before the claims in question were submitted. It is a fundamental principle of filing claims that they must be filed before final payment. There are numerous decisions in state and federal courts holding that what might otherwise appear to be a late claim may, depending upon the facts, be deemed timely provided it was at least filed before final payment under the contract. But once the final payment request has been submitted that normally terminates any right to submit any other claims. The contractor is fortunate that the court held as it did. My advice to contractors is please follow the terms and conditions of the contract when it comes to submitting change order requests and claims. And submit all potential changes and claims before the final payment is accepted.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 18, No. 7 (December 2016).
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