The Supreme Court of Alaska Held That a Contractor’s Failure to Comply with the Contractual Notice Provisions Barred Its Claim as a Matter of Law

Neal & Co., Inc. v. City of Dillingham and CH2M Hill Northwest, Inc.,
923 P.2d 89 (Alaska 1996)

In February of 1987, the City of Dillingham (“City”) solicited bids for the construction of a sewerage facility, which would include two lagoon ponds. CH2M Hill (“Hill”), the City’s engineer and on-site representative, had completed a geotechnical survey and data summary, which was provided to interested bidders. Neal & Company, Inc. (“NCI”) was declared the low bidder at $2,059,991 and began excavation on June 6, 1987.

During the summer of 1987, NCI encountered water bubbling through sand lenses, which could possibly impair the integrity of the lagoon, allowing sewage to escape. NCI’s project superintendent discussed the issue of water permeable sand lenses with Hill’s representative. A Hill geotechnical engineer visited the project the week of July 27, 1987. NCI contended that the geotechnical engineer’s visit was scheduled because of the project superintendent’s discussion. By contrast, the City and Hill maintained that the visit had been previously scheduled.

NCI filed suit against the City for, inter alia, the alleged differing site conditions relating to excavation of materials above the pond floor. The City moved for partial summary judgment on NCI’s differing site condition claim, and NCI moved for partial summary judgment, seeking to establish the sufficiency of its notice of differing site conditions.

Resolution of the summary judgment motions turned on the application of the Differing Site Conditions clause. Paragraph 4(a) of the Contract between the City and NCI required written notice for a claim. NCI acknowledged that it did not provide timely written notice of any differing site condition, but alleged that the timely actual notice to the City was sufficient under the notice clause.

Citing federal, as opposed to state, common law, the Alaska Supreme Court noted that notice will be “considered sufficient if it was clear and it alerted or should have alerted the City to the fact that NCI believed it had encountered differing site conditions.” In this vein, NCI argued that the City was on notice (through Hill) when its project superintendent met with Hill’s geotechnical engineer and took a soil sample.

The Court rejected the City’s argument. More specifically, the Court found that the geotechnical engineer’s focus was on the integrity of the lagoon floor caused by possible sand lenses, not the consistency of the materials to be excavated. Further, the soil sample came from below the lagoon floor, which indicates that Hill was concerned about the lagoon floor as opposed to the difficulty of the excavation. Accordingly, the Court held that the City (through Hill) did not have actual notice of the differing site condition, and granted the City summary judgment because of NCI’s failure to comply with the contractual notice provisions.

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