New York State Court of Claims

New York State Court of Claims

C. P. WARD v. THE STATE OF NEW YORK, #2000-015-060, Claim No. 100201, Motion No. M-61768


Summary judgment will be granted dismissing a construction contract claim when the claimant failed to comply with the notice and reporting conditions precedent of the contract.

Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):
Cross-motion number(s):

Claimant's attorney:
Livingston T. Coulter, Esquire
Defendant's attorney:
Honorable Eliot Spitzer, Attorney General
By: Reuben Goldwaser, EsquireAssistant Attorney General
Third-party defendant's attorney:

Signature date:
August 21, 2000
Saratoga Springs

Official citation:

Appellate results:

See also (multicaptioned case)


The motion of the defendant for an order pursuant to CPLR 3025 permitting it to amend its answer to assert the affirmative defense that, "Claimant has waived its claim by virtue of its failure to utilize the disputed work provisions of the contract, a condition precedent, with regard to the claims asserted in this lawsuit", and for summary judgment dismissing the claim in its entirety pursuant to that defense is granted. On August 23, 1996, claimant was awarded a contract by the New York State Department of Transportation (DOT) for the reconstruction of 1.4 kilometers of Center Street in Geneseo, New York, involving the replacement of the roadway, curbs, sidewalks and basic utilities, including water lines, sanitary sewers, storm sewers and associated lateral lines. The bid price was $1,793,003.68 and claimant contends, without contradiction by the defendant, that the project's physical boundaries were extremely limited by a very narrow roadway and restrictive adjoining private properties consisting mostly of lawn areas. The contract called for the use of suitable excavated materials to be used as trench backfill in certain locations. The work entailed the excavation of the existing pavement to a depth of approximately two and one-half feet with the replacement of the sewer lines in trenches to a depth of ten feet. DOT did not furnish borings or subbase evaluation probes to the bidders and prior to bid the claimant dug its own test pits in what it claims was the only accessible area near the eastern perimeter of the project. Claimant's test pits indicated that the existing project's subsurface materials were basically granular in nature with some stability and were not excessively moist. Accordingly, the claimant assumed at the time of bidding that the excavated materials associated with the required utility work would be a granular product which would not contain excessive moisture.

After doing work and survey layout preparations, claimant began work on the project during October of 1996 and participated in a pre-construction meeting held by DOT on October 15, 1996. Claimant's project manager, Anthony Hartmann, was present at the meeting and among the items discussed were: that the differing site conditions clause of the contract (Subsection 109-16) was to be followed in all situations where the contractor or DOT discovered subsurface or latent physical conditions differing materially from those indicated in the contract; that the notice, record keeping and other requirements of subsection 105-14, dispute resolution and disputed work provisions, applied and were essential to establishing the contractor's claims for any additional compensation. In addition, the minutes of the meeting disclose that the dispute resolution and disputed work provision was applicable to any claim under subsection 109-16 and that, "[t]he contractor shall promptly notify, in writing, the Engineer, Regional Director and the Commissioner, as appropriate, of his contentions regarding the dispute ... and [s]trict compliance with the notice provisions of this section and substantial compliance with the recordkeeping provisions of this section and Section 109.05 Extra Force Account Work, Dispute Compensation and Recordkeeping, is essential in establishing the contractor's claim for any additional compensation."

Claimant commenced sewer line excavation at the west end of the site on October 28, 1996 and immediately determined that the excavated materials consisted of wet, unsuitable soils. The motion record fails to disclose that the claimant gave prompt written notice to the Project Engineer of the differing subsurface conditions as required by subsection 109-16(a)(1), although claimant contends oral notification was provided. Further excavation yielded additional wet, fine, silty/sandy/clay materials which were unsuitable for use in backfilling trenches. By letter dated November 26, 1996, claimant's Project Manager proposed a change in the construction methods to substitute a blend of number one and number two stone for the sanitary sewer bedding and requested payment for the substituted materials pursuant to the contract as crushed stone in place. By memo dated December 20, 1996, DOT's Assistant Regional Construction Engineer accepted the use of the stone blend as a bedding material but rejected payment for this item as crushed stone in place, reasoning that claimant's bid should have reflected the blend of number one and number two stone as a bedding material.

Claimant states that after a series of meetings and discussions, DOT approved the use of mixed crusher run rock with site excavated materials as pipe backfill and that this mixture was thereafter used for backfilling sewer and water pipes in areas where the wet, unsuitable materials were encountered. Claimant's Project Manager believed during the winter of 1996/1997 that the excavated materials would dry out in the late spring or early summer of 1997 enabling claimant to use that excavated material as backfill before the use of imported crush rock materials became too costly. However, as the excavation work continued into the Spring and Summer of 1997 claimant continued encountering the wet, unsuitable excavated materials requiring it to replace the excavated soil with large quantities of crusher run materials. Eventually, with minor exceptions, DOT rejected claimant's request for payment with regard to materials imported to replace unsuitable trench backfill material and removing that unsuitable material from the site.

By letter dated September 18, 1997, claimant requested payment of $49,590.00 for the replacement backfill material and for removal of the unsuitable excavated material. The request was denied by DOT's correspondence dated October 21, 1997 upon the grounds, among others, that claimant never requested, and DOT never approved, payment for the use of the crushed stone and all bidders were aware of the restrictive working area and traffic requirements prior to the letting of the contract. On November 3, 1997, claimant's Project Manager for the first time wrote to DOT requesting that the dispute resolution and disputed work provisions of contract subsection 105-14 be followed. In denying that request, the DOT Regional Director in a letter dated January 22, 1998 admitted that "[a]n inadvertent error was made in not making the subbase evaluation probes available to the bidders. However, as you pointed out, the probes did not go down as deep as the excavations for the sanitary and water lines". On July 6, 1998, claimant notified DOT that it was going to complete the final project paperwork while reserving its right to pursue a claim in the Court of Claims. Thereafter, the final paperwork was completed and the State's payment of the final estimate amount in the sum of $35,129.09 was returned by claimant to DOT uncashed.

The claim was filed on April 20, 1999 seeking $350,000.00 upon allegations that DOT's failure to make its subsurface exploration logs available to bidders amounted to a deceit and fraud upon the bidders and DOT's failure to pay claimant for the unanticipated cost involved in excavating and disposing of the wet, unsuitable subsurface materials and replacing it with granular fill materials was a breach of contract. The State's answer filed on May 28, 1999 did not contain any affirmative defenses. By this motion, defendant seeks to add an affirmative defense asserting that the claimant breached a condition precedent to recovery of the damages sought herein by failing to comply with certain preconditions contained in the contract. In particular, defendant relies upon subsection 109-16 (A) (1) which provides:
(1) Differing site conditions.

(i) During the progress of the work, if subsurface or latent physical conditions are encountered at the site differing materially from those indicated in the contract or if unknown physical conditions of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in the work provided for in the contract, are encountered at the site, the party discovering such conditions shall promptly notify the other party in writing of the specific differing conditions before the site is disturbed and before the affected work is performed.

(ii) Upon written notification, the Engineer will investigate the conditions and if it is determined that the conditions materially differ and cause an increase or decrease in the cost or time required for the performance of any work under the contract, an adjustment, excluding anticipated profits, will be made and the contract modified in writing accordingly. The Engineer will notify the Contractor of the determination whether or not an adjustment of the contract is warranted.

(iii) No contract adjustment which results in a benefit to the Contractor will be allowed unless the Contractor has provided the required written notice.

(iv) No contract adjustment will be allowed under this clause for any effects caused on unchanged work.

(v) The aforesaid differing site condition clause (§ 109-16 A(1)) shall be governed by the notice provisions set forth above, and the recordkeeping and other requirements of § 105-14, Dispute Resolution and Disputed Work Provisions, and additional compensation via order on contract(s), if any, shall be made pursuant to § 109-05 B, New Item Charges, 1 (Agreed Price) or 2 (Force Account Charges) and E. Required Content of Dispute Submission (2) and F, Required Certification of Dispute. However, the equipment compensation provisions shall be governed and controlled by the provisions of § 109-05 D (2).
Subsection 105-14 of the contract, entitled Dispute Resolution and Disputed Work Provisions, provides, in part, that "[i]f the contractor fails to comply with the requirements of this section, any claim of the Contractor with respect thereto shall be deemed waived." Subsection 105-14 (A) (1) (a) states:
The term 'dispute' shall mean a matter of contract performance or contract compensation, including granting of extensions of time, in which there is or may be disagreement between the Contractor and the Department and which may involve adjustment of contract items or the addition of new items to the contract, extension of time for performance and/or adjustments in compensation necessitated by the resolution of such disagreement.
The subsection is specifically made applicable to "all such applicable events under § 109-16" and provides in 105-14 (A) (2) as follows:
2. Strict compliance with the notice provisions of this Section and compliance with the recordkeeping provisions of this section and § 109-05, Extra, Force Account Work, Dispute Compensation and Recordkeeping, shall be an essential precedent condition under the contract provisions to any recovery of time related damages by the Contractor whether it be under the contract provisions, court actions and proceedings or otherwise.
Subsection 105-14 (C) covers disputed work and provides that if in the opinion of the contractor he is being ordered by the engineer to do extra work not encompassed by the contract the contractor must give written notice within ten working days to the engineer setting forth its contentions. The contractor is required to progress the work and proceed with its contractual remedies of appeal to the Regional Director in writing and thereafter to the Commissioner. Subsection 105-14 (C) provides that:
This subsection shall cover all such applicable extra work under § 109-16. During the progress of such disputed work, the Contractor and Engineer shall keep daily records and make reports of all labor, material and equipment used in connection with such work and the cost thereof as specified in § 109-05 C, Force Account Reports.
Subsection 109-05 (C) provides:
C. FORCE ACCOUNT REPORT. Payment for force account work will be made on the basis of the following reports.

1. The Contractor will deliver to the Engineer-in-Charge a daily summary of FORCE ACCOUNT WORK done on the contract. This summary will be delivered to the Engineer-in-Charge not later than closing time on the day following that for which the work is reported.

The summary shall be on the appropriate form as described by MURR. The Engineer-in-Charge will supply the forms:
The summary shall contain:
a. A list of materials used indicating the amount and nature of each material. The cost (if known) should also be included. This must be documented later by proper receipts.

b. A list of equipment used indicating the number of hours used and the kind, type and size of equipment.

c. A list of personnel by name, including the hours worked, and labor classification at which they were used on the force account work and the location by station or station of the work proposed.

d. A statement of the work accomplished by force account for that day.

e. This summary will be dated and signed by the Contractor's authorized representative and the Engineer-in-Charge.

f. The contract number and other identification as well as the name of the Contractor shall appear on the statement.

g. The Engineer-in-Charge will make any notations, remarks or comments on this form that may assist in final payments.

2. Within 5 calendar days after the end of each pay period, the Contractor shall deliver to the Engineer-in-Charge a FORCE ACCOUNT SUMMARY OF LABOR used on the work which shall include the name, hourly rate of pay, hours worked, fringe benefits, and/or other items as shown on the actual payroll.

3. On completion of the specific force account work, the Contractor shall within 10 calendar days, deliver to the Engineer-in-Charge a Force Account Summation wherein all materials, equipment, and labor charges are shown and totaled together with such other expenditures as are concerned with the force account item. This summation shall be dated and signed by the Contractor's authorized representative and the Engineer-in-Charge.

4. In the event the contractor fails to deliver the required force account documentation to the EIC within the time period specified in § 109-05, subsection c, of these General specifications, and as a result the Order-on-Contract for the force account work is not fully approved at the date of final acceptance, the number of calendar days of the time period between final acceptance and the issuance of this force account Order-on-Contract, attributable to the Contractor's late force account submissions will extend the required payment date by an equal period of time.
Subsection 109-05 (D) provides that, limited by Article 13 of the contract and Section 109-16, only certain listed elements of damage will be recoverable and generally provides that those elements must be "documented". Defendant's position is that the foregoing contract clauses make prompt written notice to the engineer of the disputed subsoil conditions and daily written reports of the expenses created by those subsoil conditions a condition precedent to any recovery upon this claim.

The motion record before the Court is devoid of any prompt written notice to the engineer of the disputed subsoil conditions and the claimant has not submitted the daily expense records required by the contract. Instead, claimant argues that it has a viable claim due to DOT's withholding of the results of its subbase evaluation probes from bidders. With respect to the notice and reporting requirements relied upon by defendant in support of the summary judgment motion the claimant's arguments are set forth in the pertinent parts of paragraph 9 of the affirmation of Anthony Hartmann as follows:
The State's EIC and other NYSDOT personnel did not appear to ever absolutely close the door to such payments, in effect lulling Claimant into not formally making a disputed work claim. The hope was always kept alive that the matter might be amicably and fairly adjusted when the total picture with respect to the final crusher run rock backfill materials quantities was seen. . . .And it is noteworthy that here, unlike the A.H.A. and the Tug Hill cases, the State kept from bidders, including Claimant, the NYSDOT pre-construction subsurface Exploration Logs (soils probes) which the State had at its disposal, and which, if the information had been available to the Claimant pre-bid, would undoubtedly have resulted in a significantly higher bid . . .
The first issue is whether the defendant should be granted permission to amend its answer to include the affirmative defense of the contractual conditions precedent. Leave to amend a pleading is to be "freely given" and should be withheld only upon a demonstration of prejudice by the party opposing the motion (Edenwald Contr., Inc. v City of New York, 60 NY2d 957). "Delay alone is not sufficient to deny a motion to amend unless accompanied by sufficient prejudice" (Architectural Builders Inc. v Pollard, 267 AD2d 704). "In the context of a motion to amend prejudice means the 'loss of a special right, a change in position, or significant trouble or expense that could have been avoided had the original pleading contained the proposed amendment' " (Seaman Corp. v Binghamton Sav. Bank, 243 AD2d 1027, 1028). Prejudice has been described as including circumstances where "the party opposing the amendment has been hindered in the preparation of its case or has been prevented from taking some measure in support of its position" (Pritzakis v Sbarra, 201 AD2d 797, 799; Garrison v Clark Mun. Equip., 239 AD2d 742). Claimant has not argued that it would be prejudiced by the granting of the motion to amend, much less set forth in what manner it has been hindered in preparing its case, lost a special right, or changed its position. Consequently, since the proposed amendment does not clearly lack merit it will be permitted (Crimmins Contr. Co. v City of New York, 74 NY2d 166). Once the amendment is allowed, upon a proper record, it is appropriate to consider granting summary judgment dismissing the pleading based upon the added affirmative defense (Goldstein v St. John's Episcopal Hosp., 267 AD2d 426; Prote Contr. Co. v New York City School Constr. Auth. [Christopher Columbus H.S.], 248 AD2d 693).

As to the merits of the summary judgment motion, the State will be held liable for breach of a construction contract when it withholds relevant information concerning site conditions or furnishes inadequate and misleading information to bidders which does not fairly represent the conditions at the site (Public Constructors v State of New York, 55 AD2d 368), including subsurface soil conditions (Grow Constr. Co. v State of New York, 56 AD2d 95). Liability under this theory will not be imposed when the State made no test borings and did not possess any detailed knowledge of subsoil conditions (Conduit & Foundation Corp. v State of New York, 52 NY2d 1064). The applicable rules are explained in the case of Savin Brothers v State of New York, 62 AD2d 511, 515, affd 47 NY2d 934, as follows:
The ultimate guide in determining whether or not the contractor is to be paid for extra work is the contract itself (Kuhs v Flower City Tissue Mills, Co., 104 Misc 243, mod other grounds 189 App Div 539, affd 190 App Div 928, affd 231 NY 637; 10 NY Jur, Contracts, § 282). It is a question of intent of the parties. Where the contract contains positive representations as to conditions, substantially amounting to a warranty, recovery may be had, but if the parties intended the contractor to rely upon its own investigation, no recovery for extra work may be had, absent a showing of fraud or misrepresentation as to existing conditions.
Here, it is established that the State withheld from bidders the results of test borings made during August of 1993 to a depth of five feet showing gravely/sandy/silty and moist conditions in the materials beneath the pavement of Center Street. Neither party has submitted a complete copy of the contract so that the Court could determine whether it contained positive representations as to subsurface conditions amounting to a warranty or whether it required the contractor to rely upon its own investigation. In the absence of the newly added affirmative defense, this Court would hold that there were questions of fact precluding summary judgment regarding the issue of whether DOT misled claimant by withholding the results of its test borings from bidders. The first factual issue would be whether those test results were of such a nature as to have made a difference in the price submitted by the bidders, an issue requiring expert testimony. A second issue of fact presented by this record is whether the contractor was required by the contract to determine the subsurface conditions by its own inspection of the job site or whether the bid specifications made affirmative representations as to those subsurface conditions. However, while those factual issues would have precluded summary judgment in the absence of the affirmative defense, the dispositive question becomes whether the notice and reporting provisions relied upon by the defendant are conditions precedent which, if not complied with, bar recovery by the claimant.

Notice and reporting provisions similar to those relied upon by the defendant have been determined to be conditions precedent to recovery upon a claim for extra or disputed work which must be strictly complied with or any claims based thereon are waived (Tug Hill Constr. Inc. v County of Broome, ____ AD2d ____, 704 NYS2d 391; Three Brothers Roofing Contractors, Inc. v New York City Housing Auth., ____ AD2d ____ 703 NYS2d 237; Gemma Constr. Co. v City of New York, 246 AD2d 451). A claim involving soil conditions will be dismissed upon failure to comply with notice and reporting provisions unless the failure to comply with those provisions is excused by wrongful conduct on the part of the State (J & K Plumbing & Heating Co. v State of New York, 235 AD2d 751).

The decision of the Court of Appeals in A.H.A. Gen. Constr. v New York City Hous. Auth., 92 NY2d 20, is the controlling appellate authority regarding the effect of notice and reporting conditions in construction contracts and the type of wrongful conduct on the part of an owner which may justify a finding that such conditions have been waived. In that case, A.H.A. entered into two separate contracts with the New York City Housing Authority to rehabilitate buildings in the Bronx, New York. Both contracts included identical provisions regarding extra or disputed work which required prompt notice of a dispute to the authority and the submission of documentation setting forth the time, labor, material and cost involved in completing the extra or disputed work. The contracts further provided that the contractor was precluded from bringing a claim for extra or disputed work unless the notice and reporting provisions were strictly complied with. A.H.A. brought an action to recover for extra work and conceded its non-compliance with the notice and reporting requirement. However, A.H.A. argued that the notice and reporting conditions precedent were not applicable because of wrongful, intentional conduct on the part of the Authority. A.H.A. asserted that the Authority added certain landscape and tile pattern drawings to the contract documents after the contract had been awarded, which required extra work, and that by its conduct in the performance of prior contracts the Authority had waived compliance with the notice and reporting requirements. The Court of Appeals first noted that the notice and reporting provisions were conditions precedent to suit, rather than exculpatory clauses. The Court stated that the difference was legally significant in that an exculpatory clause will not be enforced when there is misconduct by the other party to the contract amounting to an intentional wrong. The rule with respect to a condition precedent is that it will be enforced unless the wrongful conduct by the other party prevents compliance with the condition precedent. This distinction led the Court of Appeals to conclude that "the relevant inquiry is simply not one of the Authority's bad faith or negligence in the performance of the contract but additionally whether the alleged misconduct prevented or hindered respondent's compliance with the notice and reporting requirements" A.H.A. Gen. Constr. v New York City Hous. Auth., 92 NY2d 20, 31.

Claimant's contention that the notice and reporting conditions precedent should not be applied to dismiss the claim due to DOT's wrongful withholding of its test boring results must be rejected. The conduct of DOT in withholding that information, whether intentionally or inadvertently, may have caused the claimant to underbid the contract and entitle claimant to damages if the notice and reporting provisions had been complied with. However, under no view of the circumstances could it be determined that the pre-award withholding of test boring results prevented or hindered claimant from complying with the notice and reporting requirements contained in the contract documents.

The second argument advanced by claimant for denying the summary judgment motion is that DOT's failure "to ever absolutely close the door to such payments" lulled claimant into not submitting a formal disputed work claim. Recognizing that written notice and reporting requirements in public contracts serve salutary purposes, appellate courts have been hesitant to circumvent those provisions by finding a waiver (Huff Enters. v Triborough Bridge & Tunnel Auth., 191 AD2d 314; see also, F. Garofalo Elec. Co. v New York Univ., ____ AD2d ____, 705 NYS2d 327; Nab-Tern-Betts v City of New York, 241 AD2d 379). Waiver involves the intentional relinquishment of a known right and that intent is not to be inferred from an equivocal act but must be unmistakenly manifested (Ess & Vee Acoustical and Lathing Contrs. v Prato Verde, Inc., 268 AD2d 332). In this record, there is simply no evidence of an intentional relinquishment of a known right on the part of DOT. All that is set forth in the opposition papers is that the Engineer-in-Charge and other DOT personnel "did not appear to ever absolutely close the door to such payments" thus keeping claimant's hopes alive that there might be an amicable settlement. Not denying payment for a claim that was never made is certainly a "doubtful or equivocal act" which will not support a waiver (Ess & Vee Acoustical & Lathing Contrs. v Prato Verde, Inc., 268 AD2d 332, supra). Claimant's subjective hopes based upon DOT's failure "to ever absolutely close the door to such payments" is not a sufficient basis to find a question of fact upon the waiver issue. Especially so, in light of the strong public policy favoring the enforcement of notice and reporting conditions precedent in public construction contracts.

August 21, 2000
Saratoga Springs, New York

Judge of the Court of Claims

The Court considered the following papers:
  1. Notice of motion dated May 24, 2000;
  2. Affidavit of Dennis Kostraba sworn to May 24, 2000, with exhibits;
  3. Affirmation in opposition of Livingston T. Coulter dated June 15, 2000;
  4. Affidavit in opposition of Anthony Hartman sworn to June 16, 2000, with exhibits.