Washington Supreme Court Upholds Validity of Contractual Protest and Notice Requirements in Construction Contracts

By John Parnass
Nov. 2003

On October 23, 2003, the Washington State Supreme Court handed down its decision in Mike M. Johnson, Inc. v. County of Spokane, and effectively closed a long simmering debate on a major issue of Washington construction law: whether contractual claim procedures (i.e., notice clauses, contractual protest mechanisms, etc.) are to be strictly enforced or not.

In a 5-4 vote, the Supreme Court held that such mandatory provisions are to be enforced as written, subject only to the defense that compliance has been waived by the benefited party. As a result, the Supreme Court held that the plaintiff contractor’s claim for extra compensation must be denied on procedural grounds without reaching the merits of the claim.

In light of this holding, the focus will shift to the specific language in the contract. Parties seeking to take advantage of this holding (or to avoid its strict effect) are well advised to review their contracts carefully. In practical terms, the holding means that the traditional contractor practice of writing a letter to the owner expressing concerns over changes and purporting to “reserve” the right to seek extra compensation later is not enough when the contract requires more. To retain its rights, the contractor (or subcontractor, as the case may be) will need to submit whatever protest or claim documentation is required to be submitted by the contract within the specified deadline.

The dispute grew out of a sewer project in Spokane County. The contract was awarded to Mike M. Johnson, Inc. (“Contractor”) and the contract was made subject to Washington State Department of Transportation’s Standard Specifications for Road, Bridge and Municipal Construction (“WSDOT Specifications”). The WSDOT Specifications contained a requirement that the Contractor file a written protest within 15 calendar days for claims of additional compensation, time extensions and changed conditions. The WSDOT Specifications also provided that failure to follow the mandatory claim procedures would constitute a complete waiver of any claims for protested work.

In the lawsuit, the Contractor claimed that a road improvement project in its construction site caused interferences (and consequent delays) because of utility conflicts. The Contractor sent the owner a letter advising of this delay but did not file a written protest as required under the WSDOT Specifications. The Contractor sent additional subsequent letters alerting the County to cost and time impacts but at no time complied with the strict requirements of the WSDOT Specifications for prosecution of a claim.

Ultimately, the Contractor sued the County for additional compensation. The County moved for summary judgment and the trial court granted the motion on the basis that the Contractor failed to comply with the contractual protest and notice procedures.

On appeal before the Supreme Court, the Contractor argued that because the owner had “actual notice” of the Contractor’s protest or claim, it was excused from complying with the mandatory protesting claim procedures. Relying on a 1965 decision known as Bignold, the Contractor argued that Washington law recognized an “actual notice” exception to strict enforcement of contractual notice provisions. The Supreme Court rejected this argument: “Contractor’s general notice to the County that it expected additional compensation did not amount to claims under the contract, nor did it excuse [Contractor] from complying with the contractual claim procedures.” As the Court definitively stated: “We hold that 'actual notice' is not an exception to contract compliance.”

The only exception, according to the Court, is in the instance where the party benefited by the clause (typically the owner, but also a general contractor in respect to subcontractor claims) waives its compliance. At the same time, the Court made clear that proving waiver will be a difficult task. The Supreme Court analyzed the evidence and found that the Contractor failed to prove unequivocal acts of conduct evidencing an intent to waive on the part of the owner. As a result, the Contractor’s claim was dismissed without any recovery at all and without reaching the merits of its claim.

Published by DWT's Real Estate & Land Use Department

Any questions about this Advisory should be directed to:

John Parnass, Seattle, (206) 628-7749, johnparnass@dwt.com

This Real Estate and Land Use Advisory is a publication of the Real Estate and Land Use Department of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in real estate, land use, and construction law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2003, Davis Wright Tremaine LLP.

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