Notice Provisions in Related Contracts May be Binding

Feb 22, 2017

In New York, a subcontractor may be bound by notice provisions in the contract between the prime contractor and the owner.

All contractors know that failure to comply with notice provisions in construction contracts may jeopardize their ability to litigate suits on their merits.

This proved true in a recent New York case, Schindler Elevator Corp. v. Tully Const. Co. Inc., Sup. Ct. NY, App. Div. Sec. Jud. Dept., No. 19193/10, May 18, 2016.

The City of New York Department of Sanitation hired Tully Construction Co. to construct a garage. The contract between the contractor and the owner contained a condition precedent that required “strict compliance” with notice provisions contained in the contract.

Tully hired Schindler Elevator Corp. to install five elevators in the garage.

When the project was delayed, Schindler filed suit against Tully to recover alleged damages they incurred as a result of the delay. On appeal the Appellate Court in New York rejected Schindler’s suit.

An article in CONSTRUCTION law signal by Carol A. Sigmond and Kathleen M. Morley explains the court’s decision.

The court dismissed Schindler’s “claim in its entirety because emails and letters that the subcontractor provided to the prime contractor did not comply with the strict notice provision in the prime contract… What is noteworthy about the Schindler case is that this notice provision did not come from the underlying subcontract. It came from the prime contract with the owner.”

The authors explain that the subcontract contained a “‘flow-down’ provision” which stipulated the subcontractor was bound by provisions in the prime contract.

Some states do not strictly enforce notice provisions. New York is not one of those states.

Therefore, the Appellate Court ruled that “… the Supreme Court should have found that the plaintiff [Schindler] failed to strictly comply with the notice requirement, and dismissed the complaint on that ground…The plaintiff’s remaining contentions have been rendered academic in light of our determination.”

Sources—

New York Case Reminds Us That Some Courts Take Notice Provisions Very Seriously, Carol A. Sigmund and Kathleen M. Morley, CONSTRUCTION law signal, Jan. 6, 2017.

Schindler Elevator Corporation, respondent v. Tully Construction Co., appellant, Supreme Court of the State of New York Appellate Division: Second Judicial Department, No. 19193/10, May 18, 2016.