time impacts of the change. Such provisions typically include an owner directive that mandates that the contractor perform the work, and then notes how the contractor can resolve the cost and time impact issues. If the cost and time negotiations remain unresolved after this process, the contractor can proceed with dispute resolution. The underlined text below represents specific pre-claim requirements.
AIA A201 – Section 7.3: If the contractor and the owner cannot reach an agreement on the change to the contract sum or contract time relating to a change order, the owner can issue a construction change directive that forces the contractor to proceed with the change-related work. Per Section 7.3.6, the contractor is to advise the architect if it disagrees with the method, if any, provided in the construction change directive for determining the proposed adjustment in the contract sum or con tract time. The contractor can then move to issue a claim per Article 15.
ConsensusDocs 200: Per Section 8.2, if the contractor and the owner cannot agree to the terms of a change order, the owner can issue an interim directive to the contractor that requires the contractor to perform the subject work. At that point the contractor can move directly to dispute resolution per Article 12. Hence, no pre-claim notifications are required.
EJCDC C-700 – Section 11.03: If the contractor and the owner cannot agree upon the cost and time impacts relating to a change order, the owner can issue a work change directive to the contractor and the contractor shall proceed with the work. Per Section 11.03.B, the contractor shall issue a change proposal to the engineer no later than 30 days after the completion of the work set out in the work change directive. The engineer shall complete its review of the contractor's change proposal within 30 days of receipt. The contractor can then appeal the engineer's decision by filing a claim under Article 12.
II. Claim Notice Provisions
Once the claimant fulfills the pre-claim requirements, it can initiate the formal claims process by properly noticing the respondent about the claim, if required by contract. Most construction contracts include claim notice procedures and it is important to identify how the notice of a claim can be served, as certain standard contract forms still do not include electronic delivery as an acceptable form of notice.
Notice provisions place the burden on the claimant to give the respondent a heads up on issues that involve impacts that affect the claimant's cost and/or time on the project. Timely notice benefits the respondent because it allows for a timely investigation of the claim issue so sound decisions can be made in a contemporaneous manner. In certain instances, failure to timely notice the respondent may prejudice the respondent.
Some claimants are hesitant to follow contractual claim procedures for fear of the negative effect it might have to the performing party–paying party relationship. Other claimants fear that the issuance of formal claims might cause respondent retaliation. As a result, claimants often bundle claim issues and submit them at the tail end of projects, which can catch respondents by surprise, and this typically leads to unproductive communications and binding dispute resolution. One way to avoid such discomfort is for the parties to review the dispute resolution process up front and periodically during the production phase so both parties are reminded that the defined claim protocol is there to resolve issues early in the dispute resolution process and it serves to prevent claims from snowballing to a point where binding dispute resolution is the only way to achieve resolution. Resolving claims early is typically a benefit to both parties.
Each of the examples below is based on a contractor being the claimant and an owner being the respondent and the two parties have entered a standard contract form and the owner is responsible for the design on the project. The examples cover the notice of claim provision typically required for general claim items, claims regarding a lack of adequate funding, claims related to a failure to make timely payments, and termination by the contractor.
A. Notice of Claim Provisions for General Claim Items
Certain standard contract forms require the claimant to issue a formal notice of claim to the respondent prior to issuing complete claim submissions. This makes sense because it typically takes time to calculate cost and time impacts associated with claims. It is standard for notice of claims to be issued by the claimant within 14–21 days of the event giving rise to the claim or first recognition of the event.
1. AIA A201 General Conditions
Per Section 1.6.2 of the AIA A201, the claimant (owner or contractor) shall serve notice of claims in writing and deliver such notices via certified or registered mail, or by courier providing proof of delivery. Per Section 15.1.3 of the A201, for claims where the condition giving rise to the claim is first discovered prior to the expiration of the contractor's one-year warranty period, the claimant (owner or contractor) shall initiate the claims process by providing notice to the initial decision maker, the other party, and the architect. Claims by either party must be initiated within 21 days after the occurrence of the event giving rise to such claim or within 21 days after the claimant first recognizes the condition giving rise to the claim, whichever is later. When the condition giving rise to the claim is first discovered after expiration of the contractor's one-year warranty period, it shall be initiated by notice just to the other party.
Sample Notice Letter that Conforms to the AIA A201
Via Certified Mail
April 23, 20__
Owner
Address
Re: Project: Project Name
Subject: Section 15.1.3.1 Notice of Claim
Dear Owner/Initial Decision Maker/Architect,
Pursuant to Section 15.1.3.1 of the AIA A201 General Conditions, Contractor hereby submits a formal Notice of Claim for the additional scope of work identified on the revised architectural plans that Owner issued to Contractor one week ago, on April 23, 20__. Specifically, Drawing A.2.06 indicates approximately 80 additional feet of wall assembly that was not contemplated in the bid set of plans that the Contract Price is based upon. Thus, this scope is outside of the defined Work. Contractor is calculating cost and time impacts associated with this additional work and will issue a formal Claim for an initial decision per Section 15.2 of the A201 soon. If you have any questions or comments, please contact Contractor at your convenience.
Sincerely,
Contractor
2. ConsensusDocs 200
Per Section 13.5 of the ConsensusDocs 200, the contractor's written notice for claims is effective “upon transmission by any effective means.” Thus, notice can be served via electronic mail, US postal, or overnight delivery. Per Section 8.4 of the ConsensusDocs 200, the contractor shall issue a “changes notice” of claim to the owner within 14 days of the occurrence giving rise to the claim or the contractor's first recognition of the condition giving rise to the claim. The contractor shall submit written documentation in support of the claim within 21 days of the notice. The owner shall respond to the claims no later than 14 days after receipt. If the owner does not respond within 14 days or the contractor takes exception to the owner's response, the contractor can trigger dispute resolution per Article 12.
Sample Notice Letter that Conforms to the ConsensusDocs 200
Via Certified Mail
April 23, 20__
Owner
