It’s the Law: Construction contract delay procedures are specific

All construction contracts have certain key features to them, such as the scope of the construction work to be performed, the cost of the work and the time upon which the work is to be completed.
Most construction contracts have specific procedures that must be followed if any of these key terms are going to be changed. A recent California case found that the parties must specifically follow the contractual procedures to amend the completion date of the construction contract and if those procedures are not followed, then there is no extension of the completion date.
In the case of Opinsky Construction v. City of Oakdale, the City of Oakdale hired Opinsky for a building project. The contract required that the work was to be completed within 300 calendar days and provided for liquidated damages in the amount of $250 for each day that the work was not delivered on time. The contract stated that either the time for performance or the overall contract price could only be altered by a change order, and there were two methods by which a change order could be issued. First, the parties could mutually execute a written change order to change any specific provision of the contract.
The second way was that if a dispute arose as to the time of performance or the price and the parties were not able to agree upon the change, then either party could submit a claim to the project engineer to issue a decision as to the claim. The party making the claim was required to give written notice of the claim to the engineer and to the other party “promptly (but in no event later than 30 days) after the occurrence of event giving rise thereto.” The claiming party would have 60 days after the event of such occurrence to submit any supporting documents to the engineer for such claim. After that, the engineer was to render a decision in writing to the parties within a reasonable amount of time. That decision would be considered a change order to the contract and binding on the parties.
In the Opinsky case, the project was completed more than seven months late. Opinsky claimed that the delay was caused by the City of Oakdale’s failure to pay certain amounts on time and to perform other actions, all of which caused the delay. The City responded by stating that it never agreed to any extension of time for project completion regardless of the City’s actions.
The trial court ruled in favor of the City based upon the fact that no change order was ever issued to change the completion date of the project. The court reasoned that: “To alter the contract time – regardless of the reasons – the contract required that the party seeking the alteration to obtain a change order either by mutual agreement or by submitting a claim to the engineer with a request for a formal decision in writing.” Since no change order was ever issued, the completion date in the contract remained as originally written.
Opinsky appealed the court’s decision on the basis that the delay was caused by the City even if Opinsky failed to use the contract’s procedures for obtaining an extension. He relied on a California case called Peter Kiewet Sons’ Co. v. Pasadena City Junior College District with similar facts in which the court determined that the owner’s failure to perform under the contract extended the completion date of the project even though the written contract required that any extension of time be mutually agreed to in writing between the parties. The Kiewet court relied on California Civil Code Section 1511, which allowed a party to delay performance of an obligation under a contract if the other party has failed to perform under the contract.
The decision in the Kiewet case was heavily criticized by various individuals and groups and the California Legislature subsequently amended Civil Code Section 1511 to provide that the parties could contractually agree that any delay in time for performance under a contract must be mutually agreed to by the parties.
The appellate court in the Opinsky case determined that the Kiewet case did not apply to the dispute between Opinsky and the City of Oakdale due to the fact that Civil Code Section 1511 had been amended subsequent to the decision in the Kiewet case. The appellate court upheld the trial court’s decision in favor of the City of Oakdale since no change order was ever issued under the contract to extend the time frame for completion.
The appellate court stated: “If the contractor wished to claim it needed an extension of time because of delay caused by the City, the contractor was required to obtain a written change order by mutual consent or submit a claim in writing requesting a formal decision by the engineer. It did neither.” The court went on to state that: “The purpose of contract provisions of the type authorized by the 1965 amendment to Civil Code Section 1511, subdivision 1, is to allocate to the contractor the risk of delay costs – even for delays beyond the contractor’s control – unless the contractor follows the required procedures for notifying the owner of its intent to claim a right to an extension.” For these reasons, the appellate court ruled that the trial court correctly denied Opinsky’s claim for an extension of time due to the City’s failure to perform under the contract.
This case is important because anyone entering into a construction contract must clearly understand all of the terms and conditions of the contract. Furthermore, once the contract is signed, it is important that both the owner and the contractor specifically follow the procedures of the contract.
They cannot simply sign the contract and then file it away and never look at it again. Doing so can lead to the type of problems that arose in this case and that could have been avoided by simply following the specific procedures in the contract.
If a contractor or owner is unsure of what specific provisions mean in either a draft construction contract or a final, signed construction contract, then they should obtain qualified counsel to advise them as to the terms and conditions of the construction contract.
This column is the work product of L+G, LLP, which has offices in Hollister and Salinas. Patrick Casey is an attorney with L+G, LLP. You may contact the author at (888) 757-2444 or [email protected]. Mail your questions to Patrick Casey, It’s the Law, c/o The Pinnacle, 350 Sixth St., Ste. 102, Hollister, CA 95023.