I previously posted a blog about the General Construction v. Grant County PUD case and the Court of Appeals’ rulings regarding notice and claim procedures.[i] The General Construction case is also noteworthy for two other issues that were raised in that case.[ii] The first issue involved whether a contractual written notice requirement is satisfied when the notice is provided on a chalkboard only. The second noteworthy issue is whether the Public Utility District’s (“PUD”) own in-house engineer could waive the contractual notice and claim procedures in the PUD’s contract.
As a refresher, the General Construction[iii] case involved the construction of a fish ladder on the Wanapum Dam for the Grant County PUD. General Construction was the prime contractor on the project, and it sued the PUD for changed work on the project. The PUD defended those claims by arguing that General Construction had not complied with the notice and claim procedures in the PUD’s contract.
One of the claims for extras involved the PUD’s direction to General Construction to abandon the method of construction that had been planned by General Construction on the project. When the PUD’s engineer directed General Construction to abandon that method, General Construction’s representative allegedly provided notice to the PUD by writing it on the project chalkboard for the PUD’s representative to see. General Construction argued that the act of writing it on the chalkboard complied with the written notice requirement in the PUD’s contract.
The court held that the chalkboard writing was not sufficient and stated as follows:
Even if it were semantically correct to call this ‘written,’ it defies the clear contractual intent that notice be made in a substantial and permanent manner, which could, if necessary, be forwarded to PUD management for approval. Writing on a blackboard which is subsequently erased evinces no intent by [General Construction] to provide notice.
It is not clear from the case whether the requirement that the notice be in a “substantial and permanent manner” was actually in the PUD’s contract. If so, this would be unique because most owner contracts do not contain this requirement.
We must give credit to General Construction for creativity on this argument. Unfortunately, this argument did not prevail.
CAN THE PUD’S OWN ENGINEER WAIVE THE NOTICE OF CLAIM PROCEDURES?
General Construction also argued that the PUD’s engineer, who was a PUD employee, had waived the notice and claim procedures in the PUD’s contract. General Construction argued that the PUD’s engineer had directed General Construction not to file claim letters.
The issue on appeal was whether the engineer had authority to waive the notice and claim procedures by directing General Construction to not file claim letters. The contract provided that its engineer had authority to modify the contract to direct minor changes. Per the contract, he specifically had authority to direct changes that would not result in additional costs, as well as limited authority to direct changes that would cost less than $10,000. He also could require General Construction to continue with changed work pending a decision by the PUD on General Construction’s objection. However, the contract specifically precluded him from directing work changes that would result in substantially increased costs, or otherwise modify the contract.
Notably, General Construction was not arguing that the PUD’s engineer had directed the additional changes that were over $10,000, only that he had waived the notice and claim procedures in the contract. It was not clear from the opinion whether the PUD’s contract had specifically stated that the engineer could not modify any other term in the contract. The Court of Appeals summarily dismissed General Construction’s argument. The Court held “the engineer simply had no authority to modify the contract and [General Construction] knew that fact.” The Court stated that the limiting language in the contract as to the engineer’s authority to direct changes in excess of $10,000 precluded his ability to waive General Construction’s obligation to comply with the notice and claim procedures in the contract.
Comment: This part of the General Construction decision demonstrates a trap for the unwary. You should carefully review what restrictions, if any, are applicable to the owner’s representative prior to performing work. If there are limitations on the owner’s representative’s right to direct changes or modify the contract, these provisions may be enforceable.
[i] You may locate my previous blog here.
[ii] These issues were addressed in an unpublished portion of the General Construction decision. This means that it can be cited as nonbinding authority, and it will be given such persuasive value as the court deems appropriate.
[iii] General Construction Company v. Public Utility District No. 2 of Grant County, 2016 WL 4578106.