Georgia Court Reverses Summary Judgment Against Contractor On Delay Damage Claim

APAC-Georgia, Inc. v. Department of Transportation,
1996 Ga. App. LEXIS 503 (Ga. Ct. App. May 13, 1996).

Contract provision requiring notice for claims based on extra work did not require such notice for delay claims based on failure to coordinate; issue of fact existed as to whether separate notice requirement had been complied with and/or waived; provision precluding recovery of damages for design errors and omissions did not preclude recovery of damages for failure to coordinate response of multiple primes to design changes.

Plaintiff APAC-Georgia, Inc. (“APAC”) was one of the prime contractors on a multiple prime project to construct Atlanta’s “downtown connector.” APAC brought various delay claims against the owner Department of Transportation (“DOT”). On summary judgment, the lower court held that APAC’s claim was barred in part by reason of APAC’s failure to comply with contractual notice provisions and that APAC could not recover damages from DOT for delays caused by design errors and omissions.

The Georgia Court of Appeals reversed and remanded. First, the court held that the lower court had misinterpreted a contractual clause which provided that APAC was precluded from claiming additional compensation for extra work unless it gave DOT notice and received written authorization before beginning the work. The appellate court held that this provision was intended to apply to compensation for unforeseen change orders, and did not preclude APAC’s claim for delay damages based on DOT’s alleged failure to coordinate the work. The court noted that under the trial court’s interpretation of the clause, APAC’s failure to give the required notice would result in a forfeiture of its claim for damages caused by DOT’s breach of its duty to coordinate the project. The court found that forfeitures are disfavored and that ambiguities in a contract should be resolved against creating a forfeiture provision. Accordingly, the court held that the proper construction of the clause was to limit it to claims for extra work, because such an “alternate legitimate construction” would prevent forfeiture in accordance with Georgia’s public policy. Thus, the clause was held not to bar APAC’s claims.

Second, the court agreed with the lower court that a different provision of the contract required APAC to give written notice of delays as a prerequisite to any extension of the time for completion. However, the court found that disputed issues of fact required reversal of the lower court’s holding that APAC had failed to comply with this notice provision. The appellate court noted there was evidence that APAC had written numerous letters to the DOT giving notice of delays and the need for extensions. The court rejected the DOT’s argument that the failure of these letters to make specific mention of 90 individual items of work precluded APAC from raising claims based on those items. The court pointed out that the letters had informed DOT that specified delays could have a domino effect and extend the final completion date, that APAC had written monthly updates showing delays and the amounts of delays, that APAC had received extensions of time beyond the completion date, and that no liquidated damages had been assessed against APAC.

Holding that only reasonable compliance with the notice provision was required and that the “key issue” was whether the DOT had actual notice of the delays, the court found that APAC had raised questions of fact on these issues, as well as the issue of whether strict compliance with the provision had been waived. Accordingly, the appellate court reversed the grant of summary judgment.

Third and finally, the court agreed with the lower court’s holding that under the terms of the contract, DOT could not be held responsible for delays caused by design errors and omissions. However, the court noted that such delays were to be distinguished from delays caused by DOT’s failure properly to coordinate the work of the various primes that was required in order to respond to a design change, for which DOT could be held responsible. Accordingly, the court remanded for a determination of whether the specific delays alleged by APAC were compensable or not under the contract.

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