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Washington Court of Appeals Signals Change in Notice Requirements Under Construction Contracts



Division III acknowledges hairline cracks in Mike M. Johnson rule.

“Close enough” only counts in horseshoes and hand grenades, and nowhere is that more true than when Washington courts are interpreting notice and claim procedures in construction contracts. As a result of the Washington State Supreme Court’s 2003 decision in Mike M. Johnson, Inc. v. Spokane County, Washington follows a rule of uniquely strict contract construction, whereby a contractor’s failure to follow exactly any proscribed notice and claim provision of the contract can doom the contractor’s later claims for extra work, even if the owner had actual notice of the claims and was not prejudiced by the failure to follow all claims procedures perfectly. The opinion has been oft-criticized, and there have even been attempts to overturn it legislatively, but Mike M. Johnson remains good law, and a trap for unwary contractors.

Recently, however, Division III of Washington’s Court of Appeals recognized a hairline fracture in the Mike M. Johnson claims procedure edifice. In General Construction Co. v. PUD No.2 of Grant County, Division III was faced with the question of what to do with claims for work that might be outside of the scope of the contract. The case arose from a 430-page contract to build a fish ladder on the Wanapum Dam.

As colorfully described by Judge Korsmo: “Just as no plan of battle survives first contact with the enemy, it appears no plan of construction survives first contact with the elements. Accordingly, original plans must be revised to address the changed condition. That was certainly the situation with the Wanapum fish ladder project. Change was constant; the building process saw numerous changes to the projected course of construction.”

The contractor did not strictly comply with the contract’s notice of claims provisions in all instances, but sought recovery nonetheless by arguing some of the changes were so far outside the scope of agreed work that they were not covered by the contract. Essentially, the contractor argued that it had performed extra work not contemplated by the contract and so should be able to recover in quantum meruit (a Latin phrase meaning “as much as is deserved,”), and relied on a pre-Mike M. Johnson Supreme Court decision (Bignold v. King County), that suggested this was permissible.

A majority of Division III agreed: “Giving effect to both Bignold and Johnson, we discern the following rules. First, for work within the scope of the contract, which here was "all work necessary for the Construction of Wanapum Future Unit Fish Bypass," the terms of the contract must be complied with unless there is evidence that PUD waived compliance with the notice and claim requirements. For work outside of the contract, and changed work within the scope of the contract where GCC satisfied the contractual notice and claim provisions, quantum meruit applies and entitles GCC to compensation. In essence, Bignold provides a supplemental means of recovery when the contract is not applicable.”

Showing how narrow that exception may be, the unpublished portion of the decision affirmed summary dismissal of many of the contractor’s claims. The concurring opinion by Judge Fearing argues that Mike M. Johnson silently overruled Bignold, but nonetheless given that the Supreme Court has never expressly said that, joins in the majority’s opinion. A hairline crack, but a crack nonetheless.

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