Recent Supreme Court Opinion Serves as Call to Action for Contractors to Review Contract Notice Requirements
The Supreme Court of the State of Washington issued its opinion in Nova Contracting Inc. v. City of Olympia, Docket No. 94711-2 on September 27, 2018, which hammers home the need for contractors to review the notice provisions in their contracts. The Washington Supreme Court held that the contractor’s failure to strictly comply with the notice provision applied to the contractor’s subsequent claims for the cost of the work actually completed under the contract but also to the contractor’s claims for expectancy and consequential damages (the Court declined to address the availability of an equitable exception to the notice provisions).
Put simply, the burden has been placed on all contractors to not only understand contractual notice provisions but also strictly comply with such provisions, or risk losing the ability to seek damages should a disagreement arise over their work.
The Washington Supreme Court’s decision focused on the standard specification section 1-04.5 of the Washington State Department of Transportation’s (“WSDOT”) Standard Specifications for Road, Bridge, and Municipal Construction (2012). As many contractors performing public work in Washington know, WSDOT’s specification section 1-04.5 provides that if the contractor “disagree[s] with anything required in a change order, another written order, or an oral order from the [City] Engineer, including any direction, instruction, or determination by the Engineer, the Contractor shall … immediately give a signed written notice of protest to the Project Engineer …” (emphasis added).
Importantly, section 1-04.5 further provides that by not giving notice, the contractor “waives any additional entitlement and accepts from the Engineer any written or oral order (including directions, instructions, interpretations, and determinations).” If a contractor fails to strictly comply with this section, i.e., submit a signed written notice of protest to the Project Engineer over any disagreement, then the contractor will be barred from seeking relief, including subsequent claims for the cost of the work actually completed, expectancy, and consequential damages. This “barrier” has severe implications on a contractor’s bottom line and ability to seek recovery should a disagreement arise.
In response to the Court’s opinion, contractors should endeavor to “double down” on their own efforts to review their contracts and the specific notice provisions contained therein. It is vital that contractors understand the notice provisions they are subject to and how to strictly comply should the need to protest work arise. Should any questions arise during contract review, it is recommended that a contractor consult an attorney to discuss potential exposure to the company. By ensuring that the proper procedures are followed, contractors will be better able to preserve potential claims for the cost of work, expectancy, and/or consequential damages. Such provisions are typically nonnegotiable, but further scrutiny prior to the execution of the relevant contract by one’s attorney may allow for some push back to protect against burdensome or oppressive provisions.