A New York appellate court issued a decision in 2016 that serves as an important reminder to all tiers of the construction industry: courts take the notice provisions in your construction contracts very seriously. In the Schindler Elevator Corp. v. Tully Const. Co., Inc. case, the Appellate Division dismissed a subcontractor’s claim in its entirety because emails and letters that the subcontractor provided to the prime contractor did not comply with the strict notice provision in the prime contract.
The notice provision in question required the party submitting a claim to provide verified statements of the claim amount, together with supporting documentation. The provision also said that if a claimant fails to comply strictly with these requirements, it would waive its entire claim. What is also noteworthy about the Schindler case is that this notice provision did not come from the underlying subcontract. It came from the prime contract with the owner. But because the subcontract contained a “flow-down” provision that incorporated the prime contract provisions into the subcontract—commonplace in construction contracts—the Schindler court concluded that the subcontractor was bound by the strict notice provision in the prime contract.
The Schindler decision reminds us that, while many state courts will excuse a contractor’s failure to comply strictly with contractual notice provisions (usually when the contractor can show that it substantially complied and that its customer was not prejudiced), some states like New York enforce notice provisions exactly as they were drafted. While there exists some case law in New York that, if applicable, can be used to circumvent this type of provision, it is always best to try negotiating the language of your notice provision and, if unsuccessful, strictly comply with all contractual claim and notice provisions. Doing so will ensure that you are preserving your rights and claims.
Carol A. Sigmond is a Partner in the New York Office of Cohen Seglias. She concentrates her practice on construction industry matters, including contract preparation, mediation, litigation, suretyship, bid protests, appeals and arbitration.
Kathleen M. Morley is an Associate in the Construction Group at Cohen Seglias Pallas Greenhall & Furman PC and concentrates her practice in construction litigation.