Image: David Castillo Dominici/

Sometimes, even seasoned companies ignore the fundamentals and learn a lesson the hard way.  In this case, it happened to Phoenix Signal and Electric Corp., who had done extra work, in response to the request of the New York State Thruway Authority, and just wanted to be paid for the extra work they did.

Seems simple enough, no?

They just had one "little" problem:

No one ever signed off on the change orders.

Why The Court Barred This Contractor From Recovering the Fees Accrued for Their Extra Work

In its opinion affirming the trial court's holding that barred Phoenix Signal from recovering these fees, the upstate New York appeals court held that despite the fact that the plaintiff contractor Phoenix Signal and Electric performed additional, extracontractual work that was needed to fulfill its underlying contract to install cameras and signs along the New York State Thruway, they weren't required to be paid for it.

Doesn't seem terribly fair, does it?

Here was the problem: Phoenix failed to strictly comply with the contract's notification and record keeping provision, a condition precedent to recovery.

In the words of the Court,

"[T]he subject contract explicitly provides that strict compliance with its notification and record-keeping provisions is required as a condition precedent to any recovery, and that claims for extra work are deemed waived in the absence of such compliance. When such a condition is expressly agreed upon by the contracting parties, it "must be literally performed" (Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 [1995]).

"'[N]o action for breach of contract lies where the party seeking to enforce the contract has failed to perform a specified condition precedent'" (Carr v. Birnbaum, 75 AD3d 972, 973 [2010], quoting Navilia v. Windsor Wolf Rd. Props. Co., 249 AD2d 658, 659 [1998]). Accordingly, claimant's failure to comply with its contractual obligation to provide the required notices and reports constitutes a waiver of the extra work claims (see Fahs Rolston Paving Corp. v. County of Chemung, 43 AD3d 1192, 1194 [2007]; Kingsley Arms, Inc. v. Sano Rubin Constr. Co., Inc., 16 AD3d 813, 814 [2005])."

The Moral of the Story

If you don't fulfill the explicit requirements for before undertaking additional work under a contract (a condition precedent), you run a very real risk that you may not get paid. 

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer
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