Photo of construction site with illustration of contract and change order form

Construction projects deal with a lot of moving parts, and a slew of things that can go sideways — which is why it’s so important to thoroughly understand your rights and remedies under your construction contract. And, more importantly, you have to know about any notices and claim deadlines that may be required to exercise those rights or remedies.

Change order approvals, differing site condition claims, delay claims — essentially any sort of claim you can think of on a project will typically require some sort of written notice to secure the right to make a claim, along with a deadline to make said claim. 

A recent Kentucky Court of Appeals case highlighted the importance of this. They dismissed a contractor’s claim for compensation due to differing site conditions, ruling that the contractor failed to comply with the contractual change order requirements.

The importance of timely contract notices and claims

Whenever a contractor encounters an issue on a construction project (and they often do), the first place that contractor should turn to is their contract.

“A construction contract sets the rules of the game. Playing the game requires contractors to utilize a variety of forms and documents at different moments depending on their situation.”

Scott Wolfe Jr., CEO Levelset

Construction change orders are no exception. These will usually have tight notice deadlines, coupled with another deadline to make a formal claim. 

It’s a fundamental rule of contract law that states a written agreement will be enforced according to its terms. And, pursuant to this rule, a majority of states will refuse to enforce an otherwise valid claim if the party failed to provide a contractual notice or follow the claim procedure. 

This was a hard lesson learned by one contractor in Kentucky, who failed to provide a timely change order notice or claim when they encountered differing site conditions on the project.

Dive deeper: Guide to Construction Change Order Procedures

Failure to comply with change order requirements destroy a differing site conditions claim

The case in question is: TSI Construction, Inc. v. Louisville and Jefferson County Metropolitan Sewer District.

Project Snapshot:

Contractual notice requirements

TSI was hired by MSD for excavation and removal services for a project identified as “Camp Taylor Sanitary Sewer Replacement.” The terms of the contract included the following notice provisions.

Article 13(B): Notice Requirement:

All CONTRACTOR a claims, disputes, and other matters in question against MSD arising out of or related to the Contract or the breach thereof, specifically including without limitation, claims in respect to changes in the Contract Price or Contract Time, shall be initiated by a written notice of claim submitted to MSD. Such notice of claim shall be received by MSD no later than 10 days after the event…

Article 13(J): Submittal of Documentation:

No later than thirty (30) days after the date of the written claim of notice, the CONTRACTOR shall submit a formal written claim…

Prior to acceptance of the contract, MSD hired a company to perform a geotechnical investigation. The report “did not warn off any unusual conditions that could cause problems with the construction in the underlying bedrock.”

Site conditions cost contractor substantial time and money

Once work began in February 2016, TSI discovered that the depth to the bedrock was considerably less than the plans provided by MSD. This means that they would have to remove more of the underlying bedrock than anticipated.

TSI forged on, and eventually reached substantial completion in October, 2017 — nearly four months after the substantial completion date provided in the contract.

February of the following year, TSI sent a letter to MSD informing them that they would be filing a claim for the additional and unanticipated costs incurred to excavate the rock due to the “unforeseen conditions encountered.” The letter also asserted that TSI had previously provided notice to MSD at a project progress meeting.

In November 2018 (nine months later), TSI submitted a formal written claim to MSD. MSD responded shortly thereafter, denying the claim because TSI had failed to file a timely formal claim, which resulted in the waiver of such claims.

Regardless, TSI filed an action in court, which was quickly met with a motion to dismiss by MSD for failure to state a claim upon which relief may be granted.

The court agreed, and TSI’s claims were dismissed. TSI appealed.

Contract notice provisions are strictly enforced

The crux of the appeal was to determine whether the trial court erred in dismissing TSI’s claims against MSD as unenforceable, having been waived pursuant to the terms of the contract, and more specifically under Article 13.

The court, taking TSI’s allegations in its complaint as true, acknowledged that TSI either provided or attempted to provide notice of its claims to MSD on or before February 2, 2018 — even though the contract required notice within 10 days of discovery of a changed condition. Yet, it is undisputed that TSI failed to make any formal claim until November 26, 2018 — more than nine months after the notice.

The court stated the following:

“TSI acknowledged in its complaint that ‘[a]lmost as soon as it began its work, [it] discovered that the depth to the bedrock was considerably less than was indicated on MSD’s plans for the Project, requiring TSI to have to remove more of the underlying bedrock than anticipated.’

Yet, TSI did not comply with the written requirement of notice to MSD that it intended to make a claim for additional work until February 2018, finally submitting its actual claim in November 2018, well after TSI’s work on the Project was concluded.”

In other words, TSI failed on two accounts:

  1. A notice wasn’t sent within 10 days of of when the change was discovered.
  2. Even if the late notice was considered valid, a formal claim wasn’t submitted until 9 months after the notice was sent, instead of the required 30 days.

TSI’s failure to comply with the change order notice and claim deadlines of the parties’ contract, therefore, constituted a waiver of its claims.

Accordingly, the court held that TSI’s claims were properly dismissed by the trial court.

Understand your notice requirements before starting any project

Consider your construction contract your playbook for any issues that may arise on the project. Any provisions regarding notice requirements should be given particular attention. Whether it’s a notice to secure lien rights, or a notice required under the contract, notices are crucial! Failing to satisfy your notice requirements can end up waiving your right to assert an otherwise legitimate claim.

When it comes to requesting more time, compensation, or both regarding differing site conditions, this isn’t as simple as it seems. It can be hard to calculate the full extent of the impact on your performance until you’ve actually performed the work.

But that’s no excuse to wait to send a notice of these changes — particularly in the eyes of the court. If the full extent can’t be quantified on the spot, send a notice anyways. The details can be hashed out later, but not if you missed the window to send notice.

Before starting any project, prudent contractors should take note of any and all notices and deadlines that may be required. If any part of the contract is unclear, reach out to your customer, or have an a local construction attorney review the provisions to ensure you know how to protect your right to get paid what you’ve earned.