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Where an elevator subcontractor filed a breach of contract claim against the general contractor for damages resulting from delay to the performance of the work, the general contractor moved for summary judgment on the basis that the subcontractor failed to comply with a notice provisions that flows down from the prime agreement and requires any delay claims to be submitted within 45 days of incurring the delay. The trial court apparently concluded that the GC had actual notice of the delay, even if not formally notified by the sub, and therefore denied the summary judgment motion and allowed a jury to decide damages, which were awarded in the amount of $209,000. This was reversed on appeal, with the court holding that strict compliance with the notice provision was a condition precedent, and this specifically included the requirement that “verified statements” that detailed the amount of damages incurred must be submitted. Schindler El. Corp., v. Tully Construction Co., Inc., 139 A.D. 3d 930, 30 N.Y.S.3d 707 (2016) .

 

Although some courts have been somewhat lenient in what constitutes adequate notice, and some courts have held that unless prejudice resulted from the lack of notice, the requirement will not be strictly enforced, this decision is an excellent reminder of how important it is for contractors and subcontractors to know the detailed notice requirements of their contracts and follow those requirements precisely.

Of particular note is the fact that the notice provision in question was contained in the prime contract and established a 45-day notice requirement for the prime contractor to submit claims to the project owner. Courts in New York have stated that only material terms of the prime contract flow down as a result of an incorporation by reference clause in a subcontract. It has never been very clear to me what clauses will be deemed to flow down by way of a general incorporation by reference clause versus what clauses must be specifically called out as being flowed down. Some New York practitioners are very cautious and identify all clauses of a prime contract that will specifically be flowed down.

This court decision, by this particular appellate division, suggests that notice requirements from prime agreements are material terms that will be flowed down via a general incorporation by reference clause. Perhaps one of my New York attorney colleagues could comment on this.

 

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. 19, No. 2 (February 2017).

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