Courts across the country are very strict when it comes to giving a notice of claim. They will examine the contract carefully to see what provisions have been included that govern how such a notice must be provided.
Elite Construction found this out to its loss in its dispute with the Government of Canada.
Elite entered a $16.9 million contract in 2011 to expand a correctional facility in Kingston, Ont. Work extended past the scheduled completion date, largely due to 27 change orders issued over the course of the project. Elite was paid an additional $1.3 million to cover these extras.
However, Elite wanted an additional $4.1 million and presented an expert’s report in 2016 to back up its claim. In 2017, it added a claim for another $500,000 in “aggravated, exemplary and punitive damages.”
Canada rejected Elite’s claims, pointing out several provisions in their contract covered the events and timelines under which notifications could be made, should conditions exist beyond Elite’s control that would have further delayed completion of the project.
Specifically, the contract stipulated that, “If the contractor incurs or sustains any extra expense or any loss or damage that is directly attributable to any neglect or delay that occurs after the date of the contract on the part of Canada…the contractor shall give Canada written notice of intention to claim for that expense or loss or damage within 10 working days of the date the neglect or delay first occurred.”
Elite not only failed to meet that timeline, but the documents it submitted to court made no reference at all to the contract provisions regarding notice.
“The ‘grumblings of a contractor’ are not sufficient to constitute notice,” the court ruled.
Although already paid $1.3 million for the change orders issued, Elite not only left empty-handed but was also ordered to pay $63,000 in costs.
Dentons partner Karen Groulx, senior associate Dragana Bukejlovic, and associate Ekin Cinar write, “Unless there is significant evidence that the owner is waiving its rights, or otherwise varying the terms of the contract through its conduct, the starting assumption should be that the contractor will be held to the standard of strict compliance as it relates to notice.”
And when it comes to assumptions, James De Melo of Construct Legal reminds that, “It is not enough to assume that you are safe on a new project by using your standard means and methods of giving notice. The language of each contract will govern and the specific rules created by each contract need to be followed to give you the best chance of preserving your claims.”
Notice deadline, usually expressed in terms of days, must be strictly adhered to.
More than that, De Melo points out the manner by which notice is to be given may be stipulated. Although emails may be the normal manner of correspondence between parties, mail or hand delivery may be required for notices. Provisions can even detail whether notice is correctly given on the day it is sent or on the next day when received.
The purpose of outlining the provisions for notice in the contract is, “so the other party has an opportunity to consider its position and the possibility of taking corrective measures,” writes Ryan Stubbs, a litigator at Soloway Wright LLP.
The notice time stipulated is meant to be sufficient for the other party to take possible “guarding actions,” he adds.
Of course, the parties are free to negotiate their differences in the meantime. However, giving proper notice acts to protect their claim interest.
As MLT Aikins partner Michael Weinstein and associate Jennifer Sokal write, “Engaging in negotiations over a potential claim does not relieve a party of its obligation to provide formal notice. This is why parties should be mindful of the need to provide formal notice of a potential claim within the contractual timelines, even while the parties may otherwise be engaged in ‘without prejudice’ discussions that could resolve the issue.”
John Bleasby is a freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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