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Time is Everything in a Contract


By Terry Warco, General Counsel and Treasurer, the High companies

 

We need to always be aware of time provisions in contracts.  Time provisions mean what they say and cannot be ignored.  A recent Minnesota case, Contractors Edge, Inc. v. City of Mankato, illustrates this point.  This case involved a public works project, the owner being a municipality.  The holding of the case, however, applies to all contracts. The contract at issue established a process and set time limits for the contractor to present claims for extra compensation.  Contractors Edge was required to provide the owner a written notice of the general nature of any claim within thirty days of the claim arising.  Contractors Edge then had to provide the owner a second written notice setting forth the amount and extent of the claim.  The second notice had to be provided within sixty days of the claim arising.  Contractors Edge timely provided the first notice but was late in providing the second.  The owner refused to recognize Contractors Edge’s claim for extra compensation, the Court agreed that the owner was right to do so.  

 

The result may seem harsh.  The Court said, however, that parties are “free to contract as to the type of notice that would be required”.   Having done so, the Court was not going to rewrite the contract to the benefit of one party and detriment of the other.  A court will only provide relief from time and process provisions of a contract if both parties have established a pattern of acting contrary to the contract provisions or if the party seeking to assert the contract provisions has waived them.

 

Waiver is another aspect of contract time and process provisions that I want to mention. As an owner, or as a contractor, we need to be careful to not inadvertently waive contract protections.  The Court dealt with waiver in RDP Royal Palm Motel, L.P. ex rel PADC Hospitality Corp. I v. Clark Construction Group, inc.  In this case, the owner was seeking damages flowing from the contractor’s failure to timely complete construction of a hotel.  The contract had a “time is of the essence” provision and a provision establishing a construction completion date.  Although the contractor failed to meet the completion date, the owner did not serve the contractor a default notice.  Further, after the construction completion date the owner processed change orders and issued construction directives.  The Court sided with the contractor, ruling that the owner was not entitled to liquidated damages or damages flowing from a delayed opening of the hotel.  The Court held that the owner’s actions constituted a waiver of the contract’s time provisions.  

 

The lesson of these two cases is that we need to know the time provisions in our contracts.  We then need to rigorously follow them, no matter how uncomfortable it is to do so or how strong a conviction we have that all will be well in the end because we are getting along with the other side.  If we do want to waive a contract provision we need to do so knowingly in writing and clearly state that it is only a “one time” waiver and no other provision of the contract is being waived.

 

DISCLAIMER

The above are things for you to think about and do not constitute legal advice. Before you enter a contract, consult with a qualified attorney.

CREDIT
Terry A. Warco is General Counsel and Treasurer of the High companies.