By AIA Contract Documents
May 31, 2023
A general contractor’s notice of claim to a subcontractor can serve as an essential tool to communicate an issue, minimize legal exposure, and protect legal rights on the project. This article discusses the significance of a notice of claim issued during a project, and information that may be required within the notice.
A notice of claim is typically a written communication issued by one party to another that describes an issue that arose on the project, and ultimately, a dispute that requires resolution. A notice of claim can serve several crucial purposes. First, it ensures that the receiving party is aware of the identified issue. Additionally, it can satisfy a legal or contractual requirement to initiate the dispute resolution process.
A notice of claim may be required when the project is behind schedule, or the general contractor has incurred additional costs, at the fault of a subcontractor. Legal and contractual implications of a notice of claim can vary depending on the jurisdiction and contract terms. The contract may outline the requirements for submitting and responding to the notice, so the issuing party should review the contract to determine how to properly issue one. If the parties are using the A401®-2017, Standard Form of Agreement Between Contractor and Subcontractor, the subcontract sets forth the requirements of the general contractor’s notice of claim to a subcontractor. Under the A401, the general contractor’s Claim (as defined by the contract) for costs of services or materials provided due to the subcontractor’s failure to execute the Work requires: (1) 7 days’ notice prior to the general contractor’s providing services or materials, except in an emergency; and (2) written compilations to the subcontractor of services and materials provided by the general contract and charges for those services and materials before the 15th day of the month following the general contractor’s providing of such services or materials.
Failure to follow the legal and contractual requirements of a notice of claim, including the issuance of or response thereto, may result in the loss of rights or remedies available to the parties. It is crucial for both parties to review the contract thoroughly and understand their respective obligations and rights concerning the claims process.
The notice of claim is typically a vital step in resolving disputes between parties on construction projects. By promptly communicating concerns, both parties have an opportunity to engage in open dialogue and negotiate a resolution before further escalation of the issue. Timely resolution of disputes helps to maintain a productive working relationship while on the project, and also minimizes the risk of further delays and increased costs. Ideally, a notice of claim can serve as an initial step to avoid legal action.
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.