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Posted: July 27, 2017

Actual Notice Insufficient to Meet Contract’s Strict Contractual Notice Requirement

On July 27, 2017, the Third Department issued a decision in Ridley Electric Co., Inc. v. Dormitory Authority of The State of New York, 2017 NY Slip Op. 05907, holding that actual notice was insufficient to meet a contract’s strict notice requirements, explaining:

[D]efendant submitted the affidavits and deposition testimony of two managerial employees familiar with the project. They acknowledged that the difficulty of plaintiff’s work was increased to some extent by ceiling space limitations that plaintiff could not have anticipated, but asserted that the difficulties were considerably less than plaintiff claimed, and could have been partly ameliorated if plaintiff had properly coordinated its work with other contractors. Defendant’s employees further asserted that the cleanup work was plaintiff’s responsibility under the contract. Their testimony and the record evidence established, as plaintiff concedes, that plaintiff did not submit extra work claims for either issue until March 2009, after the project had been substantially completed and almost two years after construction commenced. As Supreme Court found, this showing that plaintiff failed to comply with the notice and reporting requirements of the contract was sufficient to meet defendant’s prima facie burden to establish its entitlement to summary judgment.

The burden thus shifted, and plaintiff submitted testimony and affidavits of defendant’s employees acknowledging that defendant knew of the ceiling issue, and stating their belief that plaintiff was entitled to some related compensation. However, despite defendant’s conceded knowledge of the ceiling space issue, actual notice does not suffice to excuse lack of compliance with a strict contractual notice requirement such as that at issue here. Moreover, defendant’s general awareness of the ceiling space limitation is not equivalent to timely knowledge that plaintiff claimed that this limitation required it to perform extra work beyond the contemplation of the original contract. Defendant’s employees alleged that there were attempts made to accommodate plaintiff by such measures as lowering ceilings, permitting the use of hooks rather than cable trays, and placing certain wires under floors rather than above the ceilings, and asserted that these measures not only solved many of the ceiling space issues but also resulted in significant savings of labor and expense for plaintiff. There is no evidence that plaintiff claimed that extra work was required despite these accommodations or provided defendant with actual timely notice of deviations from budgeted expenditures that would have allowed it to plan for extra work expenses during construction.

As previously mentioned, plaintiff also attempted to present issues of fact by asserting that defendant waived the contractual notice requirements by rendering the offer of partial compensation for the extra work claim related to the ceiling in February 2010. A party’s intention to relinquish a known contractual right must be explicit, unmistakable, and unambiguous. Plaintiff claims that the offer to make partial payment on the extra work claims revealed such an intention due to defendant’s failure to mention the absence of timely notice. However, the intent to waive a right must be unmistakably manifested, and is not to be inferred from a doubtful or equivocal act.

Here, review of the pertinent documents reveals multiple provisions contradicting the claim that partial payment constitutes a waiver of the notice and reporting requirements. The parties’ contract gives defendant the general authority to order extra work and compensate contractors through change orders, as it did here, without invalidating the contract, and further provides that any partial payment made shall not be construed as a waiver of the right of defendant to require the fulfillment of all the terms of the contract. Further, the change orders by which defendant tendered payment to plaintiff provide that defendant reserves its rights to rely on and enforce the terms of the contract in connection with this change and that neither this change order nor any extension of time for performance granted hereunder constitutes an admission by defendant that it is responsible for any delays or hindrances to work under the contract. In view of these express reservations, and in the absence of any statement to the contrary, defendant’s willingness to compensate plaintiff for a limited amount of extra work cannot be construed as an express and unequivocal manifestation of its intent to waive reliance upon the contract’s notice and reporting requirements as to the extra work claim as a whole.

(Internal quotations and citations omitted).

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