Notice of Claims: Are You Prepared?

Most everyone in the construction space understands the purpose and even the process of a notice of claim—and yet, it’s also one of the most common areas of oversight and missed opportunity for all project participants.

A claim, as noted in the AIA Document A201™ -2017 General Conditions of the Contract for Construction, is a written notice of a demand for payment of money, a change in the contract time or other relief with respect to the terms of the contract. It provides the notified party a chance to investigate the matter and associated risks. Notice of claim provisions typically require that the notice must be filed within a reasonable time and contain detailed information about the issue.

A contractor’s failure to file a notice of claim within a prescribed time period, with few exceptions, will forego any chance of compensation. When it comes to notices, or any contract requirement, a general contractor has to look both at owner and subcontractor stipulations.

Here are the top three frequently missed steps when it comes to managing notice of claims:

1. Contract Limits

Make sure you know deadlines for both owner and subcontractor stipulations. Your contract documents outline time limits to file claims and the delivery format or the way claims need to be noticed (e.g. certified letter, email, phone call).

2. Surety Compliance

Many projects have required performance and payment bonds. If that’s the case, then there is likely also a requirement to alert your surety if there is a notice of claim. Is the bond in place by the subcontractor or the contractor? Regardless, know your surety notice-of-claim time limits!

3. Specification Requirements

Sometimes project specifications can set forth additional notice requirements. Often, it’s just a sentence or two that states something like, “In addition to notice requirements in the contract, the contractor must notify an individual or organization about a claims notice.”

These are three of the top areas on which to focus when preparing a notice of claim. Contractors are often busy with day-to-day activities and the project managers charged with writing claims may not know the ins and outs of the contracts, bonds, and specifications. Be prepared! If you have a really good claim and you miss your deadline, you may not win if you don’t give notice properly.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.