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2008
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Legislation -> Micahel M. Johnson Case
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CRITICAL NEW CASE AFFECTING CONTRACTORS:
MIKE M. JOHNSON v. SPOKANE COUNTY
Submitted by: Robert Marconi of Stanislaw Ashbaugh, LLP
In 1995, the Court of Appeals issued what is referred to in the construction community as the Absher decision. Widely viewed as placing enormous burdens on contractors, the Absher court ruled that a contractor’s failure to strictly follow a construction contract’s notice and dispute resolution procedures resulted in the complete waiver of all claims.
While the strict rule stated in the Absher line of cases remains controlling, a recent glimmer of hope has emerged in a Division III Court of Appeals decision. The Mike M. Johnson v. Spokane County opinion suggests that owner’s may “implicitly” waive contractual notice requirements, thereby excusing a contractor’s failure to comply.
Johnson stems from the award of two sewer construction projects to Mike M. Johnson Inc., by Spokane County. During the construction of one of the sewer projects, an interference involving utility lines was discovered. The result of this discovery was a forced redesign of the project, causing significant additional construction costs, and delays in completion. While Johnson attempted to notify the county of these additional costs and delays through submission of several written notices, he failed to use the precise five-part notice of protest required by the contract.
Despite this apparent breach, Johnson and the county, for some period of time, bargained in what the court termed “good faith” over payment of the additional costs and an extension of the contract completion date. However, when negotiations ultimately failed to produce an agreement, Johnson filed a complaint for damages against the county. At trial, the county cited Johnson’s failure to comply with the notice requirements as precluding any consideration of its claims for extra costs or time extension, and was granted summary judgment.
On appeal the Johnson court decided the county could not: a) properly plead that it was unaware that the contractor had reserved rights to claim for extras and time; or b) insist that it had not waived the contract’s notice requirements. In the first part of the Johnson court’s analysis, the court relied upon Bignold v. King County[1] in which the Washington Supreme Court held that an owner, given actual notice of a condition not anticipated in the contract, could not avoid payment of fair compensation for extra work associated with such condition. Citing Bignold, the Johnson court found that the county arguably had actual knowledge of the impacts of the redesign, and thus held that summary judgment was not appropriate.
In the second portion of their analysis, the Johnson court, in light of their previous Bignold analysis and the facts presented at trial, held that an issue of material fact also existed as to whether the county had “impliedly waived” the contract’s notice requirements. The court attached particular importance to the months of negotiations between the parties, citing these as an indication that the county intended to recognize the contractor’s claims for extras, thus indicating to the contractor that they did not intend to insist upon strict compliance with the contractual notice procedure.
While Johnson does not purport to remove the burden of compliance with notice and claim provisions placed upon contractors by Absher, it does seem to hold that adherence to notice requirements is a duty placed upon both parties to a construction contract. Under Johnson, if an owner does not timely insist on adherence to the notice requirements of the contract, or if they themselves short-circuit or ignore those provisions, they may be held to have been “impliedly” waived.
While Johnson was originally an unpublished opinion, a recent motion to publish was granted by the Division III Court of Appeals. The opinion can be found at 112 Wn. App. 462 (2002).
Bob Marconi is the Board Secretary of UCAW and Chair of its Legislative Committee. He is also Chair of
Stanislaw Ashbaugh’s Construction Law Group. He can be reached at (206) 386-5900 or rsm@stanislaw-ashbaugh.com.
[1]Bignold v. King County, 65 Wn. 2d 817 (1965)
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