Claims Administration and Procedure Under the AIA and EJCDC

Adrianne Huffman Chillemi September 19, 2008

EJCDC


1. Reference to EJCDC is to the Engineers Joint Contract Document Committee of the National Society of Professional Engineers 1.1 EJCDC General Conditions is form C-700 C-

AIA


2. Reference to AIA is to The American Institute of Architects 2.1 General Conditions is AIA Document A201 2007

CLAIM


3. Claim Defined 3.1 EJCDC General Conditions, Paragraph 1.01A 11. Claim - A demand or assertion by OWNER or CONTRACTOR seeking an adjustment of Contract Price or Contract Times, or both, or other relief with respect to the terms of the Contract. A demand for money or services by a third party is not a Claim.

3.2 AIA-201 General Conditions, AIASection 15.1.1 Definitions A Claim is a demand or assertion by one of the parties seeking, as a matter of right, payment of money or other relief with respect to the terms of the Contract. The term "Claim" also includes other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract. The responsibility to substantiate Claims shall rest with the party making the Claim.

OWNER CAUSED CLAIMS



4. Reasons for Claims arising under construction contracts 4.1 Owner caused: 4.1.1 Additions to plans; 4.1.2 Changes to plans; 4.1.3 Delays; 4.1.4 Misrepresentations; and 4.1.5 Interference 4.1.6 Delay or Failure to Make Payment

    

ENVIRONMENTAL CLAIMS
 

  

4.2 Environmental 4.2.1 Unexpected site conditions 4.2.2 Weather delays 4.2.3 Other 4.3.1 Prime Contractor Delays 4.3.2 Subcontractor Delays

5. Continuance of Work

5.1 EJCDC General Conditions, Paragraph 6.18 Continuing the Work A. CONTRACTOR shall carry on the Work and adhere to the progress schedule during all disputes or disagreements with OWNER. No Work shall be delayed or postponed pending resolution of any disputes or disagreements, except as permitted by paragraph 15.04 or as OWNER and CONTRACTOR may otherwise agree in writing.

5.2 AIA General Conditions, Section 15.1.3, 15.1.4 and 15.1.5 Continuing Contract Performance. Pending Performance. final resolution of a Claim, except as otherwise agreed in writing or as provided in Subparagraph 9.7 and Article 14, the Contractor shall proceed diligently with performance of the Contract and the Owner shall continue to make payments in accordance with the Contract Documents. The Architect will prepare Change Orders and issue Certificates for Payment in Accordance with the decisions of the Initial Decision Maker.

AIA General Conditions, Section 15.1.4, Claims for Additional Cost



If the Contractor wishes to make a Claim for an increase in the Contract Sum, written notice as provided herein shall be given before proceeding to execute the Work. Prior notice is not required for Claims relating to an emergency endangering life or property arising under Section 10.4.

AIA General Conditions, Section 15.1.5.1, Claims for Additional Time

If the Contractor wishes to make Claim for an increase in the Contract Time, written notice as provided herein shall be given. The Contractors Claim shall include an estimate of cost and of probable effect of delay on progress of the Work. In the case of a continuing delay, only one Claim is necessary.

AIA General Conditions, Section 15.1.5.2, Claims for Additional Time/Weather-Related Time/Weather-

If adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction.

NOTICE


6. Notice of a Claim. 6.1 EJCDC General Conditions, Paragraph 10.05 A. Notice: Written notice stating the general nature of each Claim, dispute, or other matter shall be delivered by the claimant to ENGINEER and the other party to the Contract promptly (but in no event later than 30 days) after the start of the event giving rise thereto.

Notice of the amount or extent of the Claim, dispute, or other matter with supporting data shall be delivered to the ENGINEER and the other party to the Contract within 60 days after the start of such event (unless ENGINEER allows additional time for claimant to submit additional or more accurate data in support of such Claim, dispute, or other matter)

D. No Claim for an adjustment in Contract Price or Contract Times (or Milestones) will be valid if not submitted in accordance with this paragraph 10.05.

6.2 AIA-201 General Conditions, AIASection 15.1.2 Notice of Claims. Claims by either Claims. the Owner or the Contractor must be initiated by written notice to the other party and to the Initial Decision Maker. Claims by either party must be initiated within 21 days after 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. 6.2.1 Concept of reserving a Claim versus real-time Claims real-

6.3 Does failure to give timely written notice in accordance with the terms of the contract bar a Claim under North Carolina law?

6.3.1 Generally. See, e.g. Blankenship Constr. Co. v. State Highway Commn, 28 N.C. App. 593, Commn, 222 S.E. 2d 452 (1976) (denying a contactors claim for additional work for failure to give written notice to the contracting authority even though the contracting authority was on actual notice of the unanticipated conditions). See also Biemann and Rowell v. Donohoe Companies, 147 Companies, N.C. App 239, 556 S.E. 2d 1 (2001), which required compliance with the written notice provision of the contract because:

failure to give proper notice to the architect prevented the architect from performing as an arbiter of disputes; acceptance of final payment was a waiver of a Claim under the general conditions of the contract; and failure to give proper notice was a breach of [Biemanns] duty to mitigate damages and prejudiced the other partys ability to cure any problem.

But see, Davidson and Jones, Inc. v. N.C. Dept. of Admin., 315 N.C. 144, Admin., 337 S.E. 2d 463 (1995) (apparently relaxing the notice requirements in the public contracting area).

WAIVER OF NOTICE


6.3.2 Can the contracts notice requirements be waived?

6.3.2.1 It has been well-established in wellNorth Carolina that [t]he provisions of a written contract may be modified or waived by a subsequent parol (oral) agreement, or by conduct which naturally and justly leads the other party to believe the provisions of the contract are modified or waived. W.E. Garrison Grading v. Piracci Construction,27 N.C. App. 725, 221 Construction,27 S.E. 2d 512 (1975) quoting J.R. Graham v. Randolph County, 212 S.E. 2d 542, 544-45 County, 544N.C. App. 1975). See also Childress v. Trading Post, 247 N.C. 150, 100 S.E. Post, 2d391 (1957); Son-Shine Grading v. ADC SonConstruction, Construction, 68 N.C. App. 417, 315 S.E. 2d 346 (1984); Triangle Air v. Caswell County, County, 57 N.C. App 482, 291 S.E. 2d 808 (1982).

6.3.3 What if a contract may only be amended in writing?

6.3.3.1 EJCDC General Conditions, Paragraph 3.04 A. The Contract Documents may be amended to provide for additions, deletions, and revisions in the Work or to modify the terms and conditions thereof in one of more of the following ways: (i) a Written Amendment; (ii) a Change Order; or (iii) a Work Change Directive.

B. The requirements of the Contract Documents may be supplemented, and minor variations and deviations in the Work may be authorized, by one or more of the following ways: (i) a Field Order; a (ii) ENGINEERs approval of a Shop Drawing or Sample; or (iii) ENGINEERs written interpretation or clarification.

6.3.3.2 AIA -201 General Conditions, Section 1.1.2 The Contract

The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind

(1) between the Contractor and the Architect or the Architects Consultants, (2) between the Owner and a Subcontractor or a SubSubsubcontractor, (3) between the Owner and the Architect or the Architects consultants or

(4) between any persons or entities other than the Owner and the Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the Contract intended to facilitate performance of the Architects duties.

 

Paragraph 1.1.1 .A Modification is (1) a written amendment to the Contract signed by both parties, (2) a Change Order, (3) a Construction Change Directive or (4) a written order for a minor change in the Work issued by the Architect.

WAIVER


6.3.3.3 Waiver can occur by oral agreement or conduct even where a change, modification or amendment has to be in writing by the contract terms. See Garrison and Graham, Graham, supra. See in particular General Specialties Company v. Nello Teer Company, Company, 41 N.C. App. 273, 54 S.E. 2d 658 (1979).

General incurred additional off-site offstorage costs and submitted a claim to Nello Teer. Nello Teer refused the claim because written notice was not given within 72 hours of the claim arising as provided in their contract. The Court concluded the written notice provision had been waived because an Assistant V.P. of Nello Teer orally agreed to the off-site offstorage.

6.3.3.4 How can this apparent contradiction in court decisions be reconciled?

6.4 How can notice issues be avoided? 6.4.1 THE PARTIES SHOULD BE ADVISED TO READ AND STRICTLY COMPLY WITH THE NOTICE PROVISIONS OF THE CONTRACT BEFORE THE WORK IS COMMENCED

6.4.2 If a contractor has not strictly complied with the notice provisions, then as soon as possible the contractor should make a Claim in writing by including the following: a. A recital of the specific contract provisions being relied upon in the contract;

b. Identify and describe the extra work that is, was or will be performed; c. Set forth the facts upon which the contractor relied showing that the owner had knowledge or directed the work be performed; d. State the facts regarding the authority or the apparent or actual authority of the representative who directed the work be performed;

e. State any facts which suggest the Owner ratified its representatives directions; f. State any facts that indicate the owner had actual knowledge that the contractor claimed the work to be extra work prior to the contractor performing;

g. State any facts which suggest the contractor performed the disputed work under protest and reserved its rights to be paid or have the contract amended or modified at a later date; and h. Consult with an attorney.

CLAIM RESOLUTION


7. Claim Resolution 7.1 Claims generally have to first be submitted to the Engineer/Architect in accordance with the terms of the contract between the owner and contractor. 7.1.1 EJCDC General Conditions, Paragraph 10.05

A. Notice: Written notice stating the general nature of each Claim, dispute, or other matter shall be delivered by the claimant to ENGINEER and the other party to the Contract promptly (but in no event later than 30 days) after the start of the event giving rise thereto.

Notice of the amount or extent of the Claim, dispute, or other matter with supporting data shall be delivered to the ENGINEER and the other party to the Contract within 60 days after the start of such event (unless ENGINEER allows additional time for claimant to submit additional or more accurate data in support of such Claim, dispute, or other matter).

A Claim for an adjustment in Contract Price shall be prepared in accordance with the provisions of paragraph 12.01B. A Claim for an adjustment in Contract Time shall be prepared in accordance with the provisions of paragraph 12.02B. Each Claim shall be accompanied by claimants written statement that the adjustment claimed is the entire adjustment to which the claimant believes it is entitled as a result of said event.

The opposing party shall submit any response to ENGINEER and the claimant within 30 days after receipt of the claimants last submittal (unless ENGINEER allows additional time).

7.1.2 AIA-201 General AIAConditions, Section 15.2, Initial Decision 15.2.1. Claims, excluding those arising under Sections 10.3, 10.4, 11.3.9, and 11.3.10, shall be referred to the Initial Decision Maker for initial decision. The Architect shall serve as the Initial Decision Maker, unless otherwise indicated in the Agreement.

Except for those Claims excluded by this Section 15.2.1, an initial decision shall be required as a condition precedent to mediation of any Claim arising prior to the date final payment is due, unless 30 days have passed after the Claim has been referred to the Initial Decision Maker with no decision having been rendered. Unless the Initial Decision Maker and all affected parties agree the Initial Decision Maker will not decide disputes between the Contractor and persons or entities other than the Owner.

15.2.2 The Initial Decision Maker will review Claims and within ten days of the receipt of the Claim take one or more of the following actions: (1) request additional supporting data from the claimant or a response with supporting data from the other party,

(2) reject the Claim in whole or in part, (3) approve the Claim, (4) suggest a compromise, or

(5) advise the parties that the Initial Decision Maker is unable to resolve the Claim if the Initial Decision Maker lacks sufficient information to evaluate the merits of the Claim or if the Initial Decision Maker concludes that, in the Initial Decision Maker s sole discretion, it would be inappropriate for the Initial Decision Maker to resolve the Claim. 7.2 Party making the claim has the burden of proof (of convincing) the Initial Decision Maker .

7.3

Decision by Architect/Engineer

7.3.1 EJCDC General Conditions, Paragraph 10.05

 

B. ENGINEERs Decision: ENGINEER will render a formal decision in writing within 30 days after receipt of the last submittal of the claimant or the last submittal of the opposing party, if any. ENGINEERs written decision on such Claim, dispute or other matter will be final and binding upon OWNER and CONTRACTOR unless:

1. an appeal from ENGINEERS decision is taken within the time limits and in accordance with the dispute resolution procedures set forth in Article 16; or

2. if no such dispute resolution procedures have been set forth in Article 16, a written notice of intention to appeal from ENGINEERs written decision is delivered by OWNER or CONTRACTOR to the other and to ENGINEER within 30 days after the date of such decision, and

a formal proceeding is instituted by the appealing party in a forum of competent jurisdiction, within 60 days after the date of such decision or within 60 days after Substantial Completion, whichever is later (unless otherwise agreed in writing by OWNER and CONTRACTOR), to exercise such rights or remedies as the appealing party may have with respect to such Claim, dispute, or other matter in accordance with applicable Laws and Regulations.

C. If ENGINEER does not render a formal decision in writing within the time stated in paragraph 10.05B, a decision denying the Claim in its entirety shall be deemed to have been issued 31 days after receipt of the last submittal of the claimant or the last submittal of the opposing party, if any.

7.3.2 AIA-201 General Conditions, AIASection 15.2 15.2.5 The Initial Decision Maker will render an initial decision approving or rejecting the Claim, or indicating that the Initial Decision Maker is unable to resolve the Claim. This initial decision shall (1) be in writing; (2) state the reasons therefor; and (3) notify the parties and the Architect, if the Architect is not serving as the Initial Decision Maker, of any change in the Contract Sum or Contract Time or both.

The initial decision shall be final and binding on the parties but subject to mediation and, if the parties fail to resolve their disputes through mediation, to binding dispute resolution.