Should Contract Claims Be Consolidated in a Single Action?

While construction contracts usually require the contractor to provide prompt notice of an occurrence giving rise to a claim, the actual adjudication of the claim – the determination of owner responsibility and the recovery of costs – is another matter. Contracts frequently mandate an attenuated process of nonbinding mediation and other administrative procedures. A final decision on the merits of the claim may be years away.

A recent Florida case illustrates this problem. A contract clause said no demand for arbitration or filing of a law suit could occur until after final acceptance of the work. Unfortunately for the contractor, this was a four-year highway project. The contractor sued on a claim that arose in the opening months of the project. The claim was premature, but successful. When the contractor attempted to litigate claims that arose later in the project, the claims were barred. The contractor was required to consolidate all its claims in a single action. It could not litigate them in a serial fashion.

A dissenting opinion in this case argued that this was an injustice to the contractor. The subsequent claims arose out of distinct occurrences and involved completely different costs. The public project owner, having paid on the initial claim, was now receiving a “get out of jail free” card. The contractor had no recourse for subsequent breaches of the contract.

Is it unfair to project owners to require them to defend a series of claims? Should contractors be required to package all their claims in a single action? Or, is this just another procedural stumbling block designed to prevent contractors from exercising their full contractual rights?

As always, I invite your comments below.

Featured in next week's Construction Claims Advisor:

• Contractor’s Complaints Were Not Repudiation of Contract

• “Responsive” Proposal Not the Same as a Responsive Bid

• Reciprocal Waiver Applied to Separate Prime Contractor

Comments

[Eden Milroy, Pilot Development Partners, Inc.]

This is really a context issue. Yes, it is reasonable that on a 4 year contract that a contractor not be made to wait in order to press his claim, but that doesn't follow when the occurrence is late in in the contract. The timing issue is a completely different matter from having to treat each claim separately. A reasonable case can be made that if it is one contract, all claims under that contract are related.

As someone who has managed public contracts, I have also encountered contractors who were more adept at the legal process than the building process. An owner needs reasonable protection from those who will seek to overwhelm the system with claims.

[J. Moissett]

Why does it seem like the owner is always at odds with the contractor in all of these cases. Owners should be as tough on the design team.

[Dale Zimmerman, Harmony Mediation]

I have found that most public and many private project documents are increasingly incomplete. By as much as 35%. This is not by accident. Owners are clamping down on costs in the design phase and shifting risk to the builder. This process only encourages delay claims.