- Construction Contracts - Pay Close Attention to the Details
- August 5, 2016 | Author: Elizabeth S. Poeschl
- Law Firm: Meagher & Geer, P.L.L.P. - Minneapolis Office
- The Minnesota Court of Appeals recently issued an order which provides contractors with a harsh reminder that all entities in the construction industry must pay attention to and follow all contractual requirements in their agreements.
In Contractors Edge, Inc. v. City of Mankato, the Minnesota Court of Appeals heard a case involving a construction agreement for a road extension project. The agreement was between the City and Contractors Edge ("Contractor"). A payment dispute arose over the location where the Contractor was required to stock pile and store excavated materials. The agreement specified that a stock pile must be one-half mile away from the project. The Contractor soon realized that the driving distance from the project site to the designated stock pile location was more than a half mile, thereby increasing the Contractor's hauling costs. The Contractor requested a Change Order to cover the increased hauling costs. The City rejected the request, arguing that the straight line distance between the project and the stock pile location was actually less than one-half mile. The agreement was ambiguous in that it did not specify whether the distance referred to "driving" or "straight line" distance.
The Contractor then submitted a written claim to the City to increase its contract sum. The parties' agreement required the Contractor to submit written notice of any claim within a prescribed time period, and to provide "supporting data" for the claim. The agreement further stated that the "responsibility to substantiate a Claim shall rest with the party making the Claim." The City rejected the Contractor's claim, stating that the Contractor failed to provide the required detailed evidence to support the Claim.
The Contractor then filed a lawsuit to recover the increased hauling costs. The City moved for summary judgment, and the district court granted the motion finding that the Contractor's "notice of claim" did not provide the "supporting data" as required by the parties' agreement. The Minnesota Court of Appeals agreed with the district court's decision, holding that the agreement required the Contractor to provide "supporting data" for its Claim. The Contractor's failure to provide the data with its written notice did not fulfill the agreement's requirements to present a valid Claim. This caused the Contractor's notice of claim to be ineffective.
Again, this case is a harsh reminder that contractors must follow all requirements within their agreements to ensure that they get paid. The risk of having an otherwise valid claim rejected for a failure to comply should not be a risk that you are willing to accept. Instead, avoid the risk by thoroughly reading, understanding, and comply with all contract terms.