Schindler Elevator Corp. v. Tully Construction Co., Inc.

Appellate Division, Second Department
139 A.D.3d 930, 30 N.Y.S.3d 707 (2016)

ELI5:

Rule of Law:

When a construction contract contains a condition precedent-type notice provision that requires strict compliance for delay damage claims, failure to adhere to the specified format and content constitutes a waiver of the claim, regardless of the other party's actual knowledge of the delay.

Facts:

In 2000, the defendant entered into a primary contract with the City of New York Department of Sanitation to construct a garage.
In August 2003, the defendant entered into a subcontract with the plaintiff to furnish and install five elevators for the project.
The subcontract incorporated the primary contract, which contained a condition precedent notice provision in Article 11.
Article 11.1.2 required a party seeking delay damages to submit 'verified statements of the details and amounts of such damages, together with documentary evidence' within 45 days of first incurring damages, and every 30 days thereafter.
Article 11.2 stated that failure to 'strictly comply' with this requirement 'shall be deemed a conclusive waiver' of any and all claims for delay damages.
The project was delayed, causing the plaintiff to incur damages.
The plaintiff sent the defendant letters and emails regarding the delays but did not provide verified statements or documentary evidence of the damages as required by the contract.

Procedural Posture:

The plaintiff commenced an action against the defendant in the Supreme Court, Queens County (a trial court), to recover damages for breach of contract.
The defendant's motion for summary judgment to dismiss the complaint was denied by the trial court.
Following a nonjury trial, the Supreme Court entered a judgment in favor of the plaintiff for the principal sum of $209,235.36.
The defendant (as appellant) appealed the judgment to the Appellate Division of the Supreme Court, Second Department (an intermediate appellate court).

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Issue:

Does a subcontractor's failure to strictly comply with a contractual notice provision, which requires submitting verified statements and documentary evidence for delay damages, constitute a waiver of its claim for such damages, even if the general contractor had actual knowledge of the delays?

Opinions:

Majority - Mastro, J.P., Chambers, Dickerson and Connolly, JJ.

Yes. A subcontractor's failure to strictly comply with a condition precedent-type notice provision for delay damages constitutes a waiver of its claim. The court reasoned that contract clauses establishing a condition precedent must be literally performed, and substantial performance is insufficient. The subcontract explicitly incorporated the primary contract's Article 11, which required verified statements and documentary evidence for delay claims and stated that failure to strictly comply would result in a 'conclusive waiver.' The plaintiff's letters and emails did not meet this standard. The court rejected the argument that the defendant's actual knowledge of the delay excused the plaintiff's non-compliance, citing precedent that actual knowledge does not relieve a party of its contractual obligations to provide formal notice. Therefore, the plaintiff waived its right to seek delay damages.

Analysis:

This decision reinforces the stringent enforcement of condition precedent notice provisions in New York construction law. It clarifies that courts will demand literal and strict compliance with such clauses, prioritizing the plain language of the contract over equitable arguments like 'actual knowledge' or 'substantial compliance.' The ruling serves as a critical precedent for construction litigation, signaling to contractors that meticulous adherence to procedural requirements for claims is non-negotiable. This emphasis on procedural formality creates a high bar for claimants and underscores the importance of careful contract administration to avoid inadvertent waiver of rights.

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