Failure to follow claims procedure was an irrevocable waiver of the claim
Consider this sentence: “courts cannot decide cases of contract interpretation on the basis of what is just or equitable.” Contractors are reminded, via an Ohio Court of Appeals decision, that claim deadlines and waiver language will be applied when the contractor is late in submitting what may well be a legitimate claim. And when the contract terms state that late claims are deemed to be waived, courts will normally enforce those terms. The case is IPS Elec. Services, LLC v. Univ. of Toledo, 2016 Ohio 361 (Feb. 2, 2016) (subscription required).
IPS was performing electrical work for the University of Toledo. There were apparently problems that impacted the schedule, not of IPS’s doing. IPS sent letters to the University complaining about the impacts, and the resulting need to accelerate performance, in October and again in December 2012. The December letter could be read to state that IPS expected the University to reimburse IPS for the additional costs. In January 2013, IPS stated in writing that it had “previously provided . . . written notices of impacts and claims.” Then, in February, IPS sent a letter providing backup. Finally, in April 2013, IPS provided a certified claim to the University.
But the contract claim language worked against IPS. Notice was required “within 10 days after the occurrence of the event giving rise to the claim.” In this instance, that would have been sometime in October 2012. Further, the contract stated that the failure to give notice “shall constitute the Contractor’s irrevocable waiver of the claim.” Substantiation of the claim was due within 30 days of initiating the claim; the contract stated that failure to provide this substantiation would also constitute an “irrevocable waiver” of the claim. Finally, certification of the claim was also required within 30 days after initiating the claim. The failure to timely provide the certification, per the contract – the reader can see where this is headed – would constitute an “irrevocable waiver.”
IPS made all the arguments one might expect of a contractor with a meritorious claim that had not complied with contract deadlines: the contract terms were unfair, the University would get a windfall, the equities weighed against a strict enforcement of the claim language, and particularly that IPS had notified the University of the issues, even if it had not done so in the proper format or strictly per the contract deadlines. The appellate court was unmoved. As recited above, the court said “courts cannot decide cases of contract interpretation on the basis of what is just or equitable.” (Please re-read that last sentence.) The contract required strict compliance, and the evidence supported the University’s position that it had insisted on strict compliance. Thus, IPS’s claims, regardless of the underlying merits, were deemed “irrevocably waived” by the contract terms, and would not be considered. The lesson? Pay attention to clauses requiring strict compliance with notice and claim deadlines.