May 29, 2020

William E. Underwood, Associate, Jones Walker, LLP.

Not all claim waivers are appropriately titled “Waiver of Claims.”  In fact, claim waivers can be found “hiding” without any advertisement or fanfare in a number of project documents, including change orders and applications for payment.  So although getting work quickly approved and paid for is important, taking time to read the specific language in your project documents is just as important.  Failure to pay close attention to this language could result in the waiver of key, unresolved project claims. 

Further, and although it should go without saying, it is also just as important to read all of the terms of your contract.  Important waiver language might not exist on the face of form project documents, but rather might be contained in the general and/or supplemental conditions of your contract and automatically incorporated into your form project documents. And these types of incorporated waivers can be just as enforceable.

So it is critically important to understand what you are signing and the implications it might have on future claims.  This article will explore some of the common types of claim waivers that can be found in project documents so that you are better positioned to avoid inadvertently waiving claims in the future.

Change Orders

Change orders will frequently contain language waiving claims for any and all costs or schedule impacts incurred prior to the date of the change order that are not specifically identified within the change order.  For example, a change order may state:

Owner and Contractor attest and agree that the Price and/or Schedule adjustment provided herein constitutes compensation in full for any damages, costs, expenses, delays, acceleration, or loss of efficiency encountered by Contractor in the performance of the Work through the date of this Change Order.  Notwithstanding the attestations above, Contractor reserves and does not waive its rights under the Contract to seek price and/or schedule adjustment for the following impacts: ________ (if blank, none).

In other words:  this Change Order fully compensates you for every impact incurred to date unless otherwise specifically noted.  So if it is not noted, any future claim is waived.

Generally, these waivers are enforceable.  So it is critical to read and understand the “fine print” contained in your change orders before signing and submitting them.  This is particularly true when multiple changes or scope revisions may be up for discussion and negotiation at the same time.  In many instances, a contractor may present multiple changes to an owner or general contractor at the same time.  Some of these changes can then be dealt with quickly, while others may take extended amounts of time and negotiation to resolve.  If you are not careful when executing change orders to address resolved claims, you may inadvertently waive your right to recover additional time and money for the other unresolved claims.

Admittedly, this can be difficult during the day-to-day grind and overall commotion of project execution.  But the importance of this task should not be lost in the mix.  So make sure to carefully read the language in your change orders.  And continue to carefully review this language, as change order forms may be subject to revisions as the project progresses. 

Pay Applications

In addition to change orders, applications for payment or contractual invoice forms may also contain waiver language.  For example:

Contractor, by signing this application, also waives all claims, including but not limited to any statutory claims, liens, and/or privileges which in any way arise out of work, labor, equipment and materials furnished by Contractor in connection with the Project up through the date of the previous Applications for Payment, except those claims previously made in writing, remain unsettled, and are specifically identified as follows (none, unless otherwise specified here): ____.

In other words: by submitting this request for payment, you waive any unresolved claims not specifically noted in the application. 

Again, as a basic starting point, waivers like this are enforceable.  Because receiving timely payment is a vitally important business component, contractors will sometimes hastily prepare, sign, and submit their payment applications.  But in doing so, they may inadvertently waive claims for additional compensation.  So in the rush to get money now, contractors may be costing themselves more money in the future.  As a result, it is critical to carefully review all of the language contained in your payment applications and ensure that you do not inadvertently waive any claims for additional compensation.

Other Contractual Provisions Incorporating Waivers into Project Documents

Waiver language can also be incorporated into contract documents, like change orders, through other general or supplemental provisions in your contract—meaning that your change order might effectively operate as a waiver without explicitly stating that in the actual document.  For example, the general provisions of your contract might state:

Contractor’s failure to request a cost or time adjustment in connection with a Change Order for impacts incurred  prior to the date of the Change Order shall constitute a representation by Contractor that no such adjustment is required and shall constitute a waiver by Contractor of its right to any such adjustment.

This language has the same practical effect of placing a waiver directly into the Change Order itself, as discussed above—except that here the Change Order will not even have this language printed on it!  And language like this can be incorporated into any number of other project documents, including pay applications, without ever appearing in the document itself.

Similarly, technical scheduling specifications contained in your contract may provide a list of items that must be submitted to obtain a schedule extension, and that the failure to provide these items will operate as a waiver of the claim for schedule relief.  Stated differently, the failure to provide this information will constitute an acknowledgement by the contractor that it is not entitled to schedule relief.  Again, this waiver language will not appear directly on any project submittal, but rather can be found within the contract itself.  But the effect is still the same.

So in addition to carefully reading your project submittals, read your contract!  Its language may incorporate waivers that might not otherwise appear on the surface of other key project documents.

Final Thoughts

Claim waivers can be hiding anywhere.  So closely read your contract and its associated documents.  It is far easier to deal with waiver issues contemporaneously when project documents are being executed than it is to fight over the enforceability of a claim waiver down the road.  In this case, an ounce of prevention is worth a pound of cure.   

The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.