Avoid being labeled a “claims contractor”

It has become a constant internal battle for contractors: Do I comply with the strict claim notice requirements in my contract to avoid possibly waiving my claim, knowing that the owner may label me a “claims contractor” for sending such notices? Or do I withhold those claim notices in an effort to play nice during the project with the hopes that the owner will make things right at the end and risk waiving my claims by failing to comply with the claim notice requirements?

If you do the former, you reserve your right to present claims later, but you risk never being awarded any further work from that owner. With construction reform in Ohio, that potentially includes public work as public owners have more and more choice in selecting their contractors. If you do the latter, you may wind up with significant additional costs but a waiver of your right to pursue a claim to recover those costs.

While there is no perfect answer, there are some guiding principles that can help a contractor through that potential minefield.

First, contractors must recognize that Ohio courts are currently likely to enforce a strict claim notice provision barring evidence of misconduct or prior breach by the owner. As a result, if you want to be absolutely sure that you can pursue your claim, you must comply with the claim notice provision.

That said, there are any number of ways to draft and deliver notice of a potential claim. Claims happen on a lot of projects, and potential claims arise on even more projects, and neither means that anyone did anything improper or mistreated the other party. It simply means that one party believes something about the project was different from what was expected at bid time. As a result, not every claim notice has to take a “scorched Earth” approach. Again, this is simply notice of a potential issue. If a contractor believes it has a claim, it does not mean the contractor is trying to take advantage of an owner. Similarly, if an owner refuses to acknowledge a change order and requires a contractor to give notice of a potential claim, it does not mean that the owner is trying to force the contractor to finance the owner’s project upgrades.

There may simply be a difference of opinion. The very purpose for the contract provisions regarding potential claims is to address those differences of opinion. For contractors, a call to the owner before sending the claim notice to explain that the contract requires such a notice and requesting a meeting to discuss the issue once the owner has had a chance to review the notice can go a long way to heading off any risk of souring the relationship. Similarly, the owner should recognize the claim notice for what it is – something the owner itself is requiring the contractor to send – and not a threat or attempt to take advantage of the owner.

Disputes can and will continue to happen, but the simple act of complying with the contract’s claim notice provision should not, and does not have to, always lead the parties to their “separate corners” to prep for a fight.