Just read a new case that addressed an AIA provisionn that is often litigated: notice of claim provisions. The case is Rcr Bldg. Corp. v. Pinnacle Hospitality, 2012 Tenn. App. LEXIS 787 and the text is available here https://www.lexis.com/research/retrieve?_m=ff96c8490a81e58211c2aa7eacda17bf&csvc=le&cform=byCitation&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLzVzk-zSkAb&_md5=09fecd23fe6d25ce38cd94a57ecc8cd3 (subscription required).
Standard AIA general conditions require that parties provide notice of claims (defined as, inter alia, disputes over money) within 21 days of the issue giving rise to the claim.
In the RCR case, the contractor contracted with the owner to construct renovations to a hospital. The project was delayed for reasons at least partly attributable to the owner's defective plans and specifications. When the job was completed, the parties met and determined the contractor was owed approximately $600,000 as part of its final payment.
Instead of making that final payment, the owner withheld the entire sum, claiming it had (1) paid subcontractors directly; (2) was asserting a 230k offset for liquidated damages because the job was delayed; and (3) holding rhe rest for anticipated payments to other subcontractors or suppliers.
The contractor argued that the owner could not unilaterally determine and withhold liquidated damages from the contractor. The contractor relied upon the AIA 201, section 4.3, notice of claim provisions.
Owner countered that the notice of claim provisions are not applicable to owner and not applicable to claims for liquidated damages, which arise automatically when a job is delayed. Owner argued that the contractor failed to seek extensions of time during the job, so it was justified in claiming liquidated damages.
The trial court adopted the owner's arguments, awarding the owner attorneys' fees in the action. The court of appeals reversed, holding that the plain language of the contract and definition of "claim" applies to liquidated damages, which are certainly claims for disputed sums of money. Based upon the owner's failure to notify the contrractor of its intent to claim liquidated damages during the job, the court of appeals held the owner had waived such claims and reversed the award of attorneys' fees to the owner.
