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101131
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No. 101,131
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
RAZORBACK CONTRACTORS OF KANSAS, INC.,
Appellant,
v.
THE BOARD OF COUNTY COMMISSIONERS
OF JOHNSON COUNTY, KANSAS,
Appellee.
SYLLABUS BY THE COURT
1.
Appellate review of the district court's ruling on a summary judgment motion is de
novo. The summary judgment standards that apply to the district court also apply to the
appellate court on review.
2.
Federal common law applies in state court proceedings only in limited areas. A
predicate for its application is the existence of a uniquely federal interest. The federal
common law of government contracts does not apply with respect to notice of a
contractor's request for additional compensation when the notice provision in the contract
is not a federally mandated or when the federal government is not a party to the contract.
3.
Notice and documentation provisions in a construction contract involving
public funds serve an important public interest in that they provide public agencies
with timely notice of deviations from budgeted expenditures or of any supposed
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malfeasance and allow them to take early steps to avoid extra or unnecessary
expense, to make any necessary adjustments, to mitigate damages, and to avoid
the waste of public funds.
4.
It has long been public policy in Kansas that freedom of contract is not to be
interfered with lightly.
5.
If the language of a lawful contract is clear and unambiguous, the parties
are entitled to have it enforced as written. Parties are free to contract for any type
of notice they desire, and when a type of notice is specified in the contract, the
provision is to be enforced as written.
6.
Waiver is the intentional relinquishment of a known right. Waiver may be inferred
from conduct. However, in order to establish waiver there must be evidence that
manifests, in an unequivocal manner, an intent that is inconsistent with the intent to claim
a right.
Appeal from Johnson District Court; JANICE D. RUSSELL, judge. Opinion filed April 2, 2010.
Affirmed.
Fred Bellemere, III, and Paul G. Schepers, of Seigfried, Bingham, Levy, Selzer & Gee, of Kansas
City, Missouri, for appellant.
LeeAnne Hays, of Johnson County Legal Department, of Olathe, for appellee.
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Before MCANANY, P.J., GREEN and MALONE, JJ.
MCANANY, J.: This appeal centers on the contract between Razorback
Contractors of Kansas, Inc. (Razorback), and the Johnson County Board of County
Commissioners (the Board) for construction of a sanitary sewer line in southern Johnson
County. The agreed contract price was $2,393,320.76. Razorback claimed that during
construction it encountered site conditions materially different from what previously had
been disclosed. It sued the Board for additional compensation of $1,342,932, but the
district court entered summary judgment in favor of the Board because Razorback failed
to provide notice of its claim in accordance with the parties' contract. Razorback appeals
that decision.
The Board provided prospective bidders on the project with two sets of soil boring
logs taken in early 2004. The boring logs were provided in order to inform prospective
bidders about the soil composition and water table on the job site. The boring logs
reported information about rock formations, soil strata, and "observed" groundwater
conditions at various depths in approximately 80 locations throughout the construction
area. The borings were not intended to measure surface water or indicate surface
conditions. Bidders were further informed about site conditions in an accompanying
April 30, 2004, letter which stated:
"SITE CONDITIONS
"The project site is located in an agricultural area of southern Johnson County, Kansas.
According to the site plan provided, the proposed sewer lines are generally in the
floodplains of Coffee Creek and [its] tributaries. The soils in these areas are by nature
typically saturated due to the natural accumulation of water by surface drainage.
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"SITE PREPARATION
"The near surface soils in several areas of this project site were saturated at the time of
our field exploration. The soil moisture contents will likely be high at the time of
construction for the proposed sewers. Drying of these soils may be required to develop a
stable base for construction activities. Discing and aeration may be sufficient to provide a
stable base. However, additional stabilization measures may be required depending on
the soil moisture content of the near surface soils at the time of construction. The
contractor should determine the most appropriate means of soil stabilization required for
the proposed work.
"EXCAVATIONS
"Excavations will be required for the proposed sewer lines. It is anticipated that the
excavations will be in clay soils and shale, sandstone and limestone bedrock above and
below the water table. Typical temporary dewatering techniques should be sufficient to
remove any water seepage that may be encountered in the excavations. The contractor
should determine the appropriate dewatering technique required to complete the work 'in
the dry.'
". . . Surface drainage should be carefully controlled to prevent flow of water into the
excavations."
The contract work was to be completed in 270 days. The contract provided for
liquidated damages of $1,000 for each day thereafter until completion of the work.
Razorback, the successful bidder on the project, is an experienced sewer
contractor with over 160 sewer and waterline projects in the Kansas City-Lawrence-
Topeka area since the year 2000. Michael Martin was Razorback's project manager.
George Butler Associates (GBA) was the Board's consulting engineering firm for the
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project. Doug Martin was GBA's senior construction observer for the project and was
onsite several times each week during construction.
The work commenced on July 19, 2004. Progress meetings were held onsite in
September, October, November, and December 2004, and in January and February 2005.
Doug Martin, the engineer supervising the project, attended each of these meetings,
prepared the agenda and minutes for each meeting, and gave Razorback an opportunity to
correct the minutes of prior meetings.
In September 2004, Razorback first reported to Doug Martin that it had
encountered unanticipated water conditions. The September 2004 progress meeting
minutes (which Razorback reviewed and apparently approved) indicate that Razorback
was experiencing "wet surface conditions and equipment problems." Razorback was a
week or two behind schedule by this time. Razorback requested no time extension or
additional compensation in September 2004.
During the October and November 2004 progress meetings, Razorback repeated
that "wet surface conditions and equipment problems" were causing delays. Again, it
made no request for a time extension or for additional compensation.
On December 7, 2004, Michael Martin sent a letter to GBA stating that
"the extremely wet ground conditions that we are experiencing on this project are causing
delays in laying pipe . . . [and] the wet ground is stopping us from delivering bedding
rock to the pipe laying operation. . . .
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"We do not see this condition improving until either the precipitation quits for several
weeks allowing the ground to dry or the temperature drops below freezing long enough to
allow the ground to freeze. . . .
"This letter is to serve notice that if we don't get favorable ground conditions soon we
will request a time extension based on the current unforeseen site conditions."
A week later, at the December 14, 2004, progress meeting, Razorback again
reported that "wet surface conditions and equipment problems" were causing delays.
Razorback did not submit a proposed time extension or price increase change order at the
meeting. However, Hal Cosgrove, Razorback's president, attended this meeting and
"asked about the possibility of . . . stopping the contract time on the project until surface
conditions were more favorable . . . . At this time[, Razorback's] progress is being slowed
by muddy surface conditions and unexpected groundwater. Hal stated that the soil
borings for the project did not indicate the presence of ground or surface water along the
easements of this project."
On December 22, 2004, GBA denied Razorback's time extension request and
instructed Razorback to continue working and to "investigate alternative methods for
working in the mud."
At the January 2005 progress meeting, Razorback reported that muddy surface
conditions caused by wet weather, unanticipated subsurface moisture, and equipment
problems put it about a month behind schedule. GBA told Razorback that there would be
no time extension for weather delays.
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On February 23, 2005, Razorback wrote to GBA requesting a change order
extending the contract performance date by 60 days under Sections 10.05, 12.02, and
12.03 of the contract. Razorback cited "the extremely wet and muddy soil conditions at
the project site." Johnson County Wastewater (JCW) approved the change order on April
19, 2005, and the date of completion was moved from April 15, 2005, to June 14, 2005.
On June 10, 2005, Razorback formally requested in writing an increase in the
contract price based upon wet and muddy soil conditions on the site that it claimed were
(1) materially different from the conditions ordinarily encountered and generally
recognized as inherent in this type of work, and (2) substantially different from what was
represented in the bid documents. According to Razorback, "[o]nce the project is
completed, we will have an opportunity to [tally] costs and to present you with a final
number."
On July 5, 2005, JCW denied Razorback's request, citing Sections 10.05 and 12.01
of the contract and the fact that notice of the claim was more than 60 days after February
23, 2005. JCW also cited Section 4.03 and noted that the letter of April 30, 2004,
accurately described the conditions Razorback would and did encounter.
Razorback replied on July 19, 2005, stating that it had given notice of the differing
conditions as early as the December 2004 progress meeting. Also, Razorback claimed
that 80% of the bores in the logs were dry holes. To document its claim for a price
adjustment, Razorback enclosed a "Claim Summary" which set forth the difference
between its actual costs ($3.2 million) and its bid price ($1.9 million).
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Razorback sued the Board for breach of contract. It also asserted a claim for
breach of implied warranty based on the Board's failure to disclose the amount of ground
and surface water present in the construction area.
The Board moved for summary judgment. The district court granted the Board's
motion, finding that Razorback failed to comply with the notice requirements of Sections
4.03, 10.05, and 12.01 of the contract. Further, relying on Owens v. City of Bartlett, 215
Kan. 840, 528 P.2d 1235 (1974), and Saddlewood Downs v. Holland Corp., Inc., 33 Kan.
App. 2d 185, 99 P.3d 640 (2004), the court found that the Board did not waive its right to
notice pursuant to the contract. On appeal, Razorback challenges the district court's
enforcement of the contract's notice provisions and the court's conclusion that the Board
did not waive its right under the contract to written notice of the changed conditions.
Finally, the district court granted the Board summary judgment on Razorback's
implied warranty claim. Razorback does not challenge this ruling.
Appellate review of the Board's summary judgment motion is de novo. Central
Natural Resources, Inc. v. Davis Operating Co., 288 Kan. 234, 240, 201 P.3d 680 (2009).
The applicable summary judgment standards are well known to the parties and may be
found in Miller v. Westport Ins. Corp., 288 Kan. 27, 32, 200 P.3d 419 (2009) (summary
judgment standards that apply to district court also apply to appellate court on review).
The Contract
Section 4.03 of the contract, the changed conditions provision, allowed Razorback
to request a price increase if it discovered and reported a condition that "[differed]
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materially from that shown or indicated in the Contract Documents." The relevant
portions of Section 4.03 provide:
"4.03 Differing Subsurface or Physical Conditions
"A. Notice: If CONTRACTOR believes that any subsurface or physical
condition at or contiguous to the Site that is uncovered or revealed either:
1. is of such a nature as to establish that any 'technical data'
on which CONTRACTOR is entitled to rely as provided in paragraph 4.02 is
materially inaccurate; or
2. is of such a nature as to require a change in the Contract
Documents; or
3. differs materially from that shown or indicated in the Contract
Documents; or
4. is of an unusual nature, and differs materially from conditions
ordinarily encountered and generally recognized as inherent in work of the
character provided for in the Contract Documents;
"then CONTRACTOR shall, promptly after becoming aware thereof and before further
disturbing the subsurface or physical conditions or performing any Work in connection
therewith (except in an emergency as required by paragraph 6.16.A), notify OWNER and
ENGINEER in writing about such condition. CONTRACTOR shall not further disturb
such condition or perform any Work in connection therewith (except as aforesaid) until
receipt of written order to do so.
. . . .
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"C. Possible Price and Times Adjustments
. . . .
"2. CONTRACTOR shall not be entitled to any adjustment in the Contract
Price or Contract Times if:
a. CONTRACTOR knew of the existence of such conditions at the
time CONTRACTOR made a final commitment to OWNER in respect of
Contract Price and Contract Times by the submission of a Bid or becoming
bound under negotiated contract; or
b. the existence of such condition could reasonably have been
discovered or revealed as a result of any examination, investigation, exploration,
test, or study of the Site and contiguous areas required by the Bidding
Requirements or Contract Documents to be conducted by or for CONTRACTOR
prior to CONTRACTOR's making such final commitment; or
c. CONTRACTOR failed to give the written notice within the time
and as required by paragraph 4.03.A.
"3. If OWNER and CONTRACTOR are unable to agree on entitlement to or on
the amount or extent, if any, of any adjustment in the Contract Price or Contract Times,
or both, a Claim may be made therefor as provided in paragraph 10.05. However,
OWNER, ENGINEER, and ENGINEER's Consultants shall not be liable to
CONTRACTOR for any claims, costs, losses, or damages (including but not limited to all
fees and charges of engineers, architects, attorneys, and other professionals and all court
or arbitration or other dispute resolution costs) sustained by CONTRACTOR on or in
connection with any other project or anticipated project."
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Section 12.01 of the contract provides that any price adjustment claim must
be made in writing and in accordance with Section 10.05. The relevant provisions
in Section 10.05 provide:
"10.05 Claims and Disputes
"A. Notice: Written notice stating the general nature of each Claim, dispute, or
other matter shall be delivered by the claimant to ENGINEER and the other party to the
Contract promptly (but in no event later than 30 days) after the start of the event giving
rise thereto. Notice of the amount or extent of the Claim, dispute, or other matter with
supporting data shall be delivered to the ENGINEER and the other party to the Contract
within 60 days after the start of such event (unless ENGINEER allows additional time for
claimant to submit additional or more accurate data in support of such Claim, dispute, or
other matter). A Claim for an adjustment in Contract Price shall be prepared in
accordance with the provisions of paragraph 12.01.B. . . . Each Claim shall be
accompanied by claimant's written statement that the adjustment claimed is the entire
adjustment to which the claimant believes it is entitled as a result of said event.
. . . .
"D. No Claim for an adjustment in Contract Price or Contract Times (or
Milestones) will be valid if not submitted in accordance with this paragraph 10.05."
Notice
Razorback claims that substantial performance will suffice to preserve its claim. It
argues that it gave actual notice of its claim and no prejudice resulted from its failure to
give written notice in accordance with the contract.
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Razorback relies on Brinderson Corp. v. Hampton Roads Sanitation Dist., 825
F.2d 41 (4th Cir. 1987), and Brechan Enterprises, Inc. v. United States, 12 Cl. Ct. 545
(1987), for support. Razorback argues that whether and when the Board had actual
knowledge of Razorback's claim and whether the Board suffered any prejudice are issues
of material fact to be resolved at trial, not by summary judgment.
Brinderson and Brechan lend support for Razorback's claims if the federal
common law of government contracts were to apply. In Brinderson, the contractor
building a wastewater treatment plant encountered unusually wet conditions from rain
and snow. The owner granted a time extension for completion of the project, and the
contractor completed construction 13 months behind schedule. It then sought a price
adjustment based, in part, on the theory that the site conditions materially differed from
what the contract documents described. The trial court granted summary judgment to the
government because the contractor failed to comply with the contract's written
notification provision.
On appeal, the court found no applicable Virginia cases addressing the issue.
However, $17 million of the $21.6 million construction cost of the project was funded by
the United States Environmental Protection Agency. The supplemental conditions clause
found in the contract was a provision required in all projects for which the EPA provides
substantial funding. Because a substantial body of federal law has developed regarding
interpretation of this federally mandated supplemental conditions clause, the appellate
court concluded that the Virginia Supreme Court would follow established federal
common law when considering the written notice provision in the contract. 825 F.2d at
44-45. The court noted that in those cases involving federal contracts, the written notice
provision had been
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"the subject of litigation in the Court of Claims and in several boards of contract appeals.
In those cases, the notice provision has not been given a literal construction. A more
liberal approach, focusing on the purpose of the clause, has been adopted. Generally,
when the owner has actual or constructive notice of the conditions underlying the claim
and an opportunity to investigate, that is sufficient. [Citations omitted.]" 825 F.2d at 44.
Brechan involved a federal construction contract administered by the Army Corps
of Engineers to repair a breakwater in southwestern Alaska. The dredging contractor
encountered harder soil than anticipated. It notified the Army Corps of Engineers that
"'there may be a possible claim if the material is in fact different than what the soil data
inferred.'" 12 Cl. Ct. at 547. The Army twice denied the contractor's informal changed-
conditions claims before the contractor submitted a formal claim for additional
compensation.
The Brechan court rejected the government's argument that the letter referencing a
"'possible claim'" did not meet the notice requirement under the contract and concluded
that the "notice does not need to be in any specific format; it need only clearly show the
existence of the condition. [Citation omitted.]" 12 Cl. Ct. at 549.
Both Brinderson and Brechan involve the interpretation and application of
federally mandated contract provisions. The federal government is not a party to the
contract now before us, as was the case in Brechan. Further, we find no indication in the
record that the contract provisions at issue before us are there because of a federal
mandate, such as in Brinderson. Federal common law applies in state court proceedings
only in limited areas. A predicate for the application of federal common law is the
existence of a "uniquely federal interest." See Boyle v. United Technologies Corp., 487
U.S. 500, 507, 101 L. Ed. 2d 442, 108 S. Ct. 2510 (1988). There is no federal interest
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demonstrated here. Hence, there is no compelling reason to apply the federal common
law of contracts.
We do find, however, that other states (New York, Connecticut, Indiana,
Washington, Wyoming, Iowa, and Ohio), applying their own state contract laws, have
strictly construed similar written notice provisions. See Perini Corp. v. City of New York,
18 F. Supp. 2d 287 (S.D.N.Y. 1998); Cecio Brothers, Inc. v. Greenwich, 156 Conn. 561,
244 A.2d 404 (1968); Starks Mechanical, Inc. v. New Albany-Floyd, 854 N.E.2d 936
(Ind. App. 2006); Mike M. Johnson, Inc. v. Spokane Cty., 150 Wash. 2d 375, 78 P.3d 161
(2003); Rissler & McMurry v. Sheridan Area Water, 929 P.2d 1228 (Wyo. 1996); Ida
Grove Roofing v. City of Storm Lake, 378 N.W.2d 313 (Iowa App. 1985); Enviresponse
v. Cty. Convention, 78 Ohio St. 3d 353, 678 N.E.2d 519 (Ohio 1997). These cases all
generally hold that written-notice-of-changed-conditions provisions should be strictly
enforced. The contractors in these cases were not entitled to price increases because each
failed to comply with their respective contract's notice requirements.
Perini involved an upgrade and expansion of the Coney Island Water Pollution
Plant. The contractor's claim for an equitable adjustment equaled approximately 40% of
the contract price. (In the case now before us, Razorback's claim is for more than 50% of
the contract price.) In requiring strict compliance with the notice provisions of the
contract, the court in Perini observed that the
"notice and documentation provisions serve an important public interest in that they
'provide public agencies with timely notice of deviations from budgeted expenditures or
of any supposed malfeasance, and allow them to take early steps to avoid extra or
unnecessary expense, make any necessary adjustments, mitigate damages and avoid the
waste of public funds.'" 18 F. Supp. 2d at 294.
15
See A.H.A. General Constr. v. NYCHA, 92 N.Y.2d 20, 33-34, 677 N.Y.S.2d 9, 699
N.E.2d 368 (1998).
In Cecio Brothers, Inc., the plaintiff was the subcontractor providing site
preparation work for a new school. Because of an apparent error in the elevations shown
in the plans, the plaintiff had to provide an additional 10,000 cubic yards of fill to
establish the finished grade for the project. The plaintiff sued the owner, the Town of
Greenwich, for unjust enrichment. The plaintiff's contract called for notice to the general
contractor of claims for additional work within 2 days of first sustaining any loss or of
proceeding with any authorized additional work. Here, the plaintiff submitted its bill for
additional fill a year after the date it completed delivery on the originally estimated
amount of fill. On appeal, the Connecticut Supreme Court rejected the plaintiff's claim,
concluding:
"Had the plaintiff given timely notice in accordance with the terms of its
subcontract, the contractor and the town would have had an opportunity not only then and
there to have inquired into the accuracy of the plaintiff's claims as to the fill requirements
but, more importantly, the town would have had an opportunity to save the added
expense and keep within the limits of the public funds appropriated for the project by
changing site plans or reducing costs in other portions of the project." 156 Conn. at 568.
In Starks Mechanical, Inc., the contractor provided plumbing and mechanical
work as part of a school renovation. When the contractor discovered defects in the design
specifications, the school instructed the contractor to proceed with construction and
correct the design defects. The contractor hired an engineer to redesign the plans and
completed the work. In April 2004, near the end of the project, the contractor presented
the school with a $1.3 million bill for the costs of redesigning the project. This was the
first notice the school received of the claim for additional pay, though the court noted that
16
"the claim admittedly arises from alleged design deficiencies dating back to 2002." 854
N.E.2d at 938. The contractor argued that its numerous communications with the school
about the design defects constituted sufficient written notice of its claim to withstand
summary judgment. The appellate court disagreed, finding as a matter of law that the
contractor's communications with the school did not comply with the 14-day written
notice requirement of the contract. 854 N.E.2d at 941-42.
In Mike M. Johnson, Inc., the sewer contractor's work included making certain
street improvements. That work was halted when the contractor encountered buried
utilities lines. The contractor wrote to the county, stating that "'we expect to be
compensated for all costs and time associated with maintaining this road while waiting
for others to complete their work.'" 150 Wash. 2d at 382. The contractor submitted a
spreadsheet listing various cost items, and there followed a "lengthy period of
correspondence." 150 Wash. 2d at 384. Nevertheless, the Washington Supreme Court
found that the contractor "failed to follow the formal claim procedures" under the
contract. 150 Wash. 2d at 384. Citing Bignold v. King County, 65 Wash. 2d 817, 822, 399
P.2d 611 (1965), the court rejected the notion of an "'actual notice'" exception, and
declared that Bignold "reaffirms the long-established rule requiring contractors to follow
contractual notice provisions unless those procedures are waived by the owner." 150
Wash. 2d at 387-88.
In Rissler & McMurray, the contractor encountered subsurface water in the
trenches it dug in order to lay a new water line. The contractor also incurred additional
time and costs when it encountered utility lines not shown in the plans. The contractor
made verbal complaints to the supervising engineers, and the contractor believed its
complaints were documented in the minutes of weekly project meetings. When the water
line was completed and tested, the contractor was required to repair numerous leaks
17
caused by ineffective bedding materials required by the contract specifications. Those
repairs were completed on August 10, 1993. The contract required claims to be filed
within 30 days of the event giving rise to the claim. On September 16, 1993, the
contractor delivered to the supervising engineers its notification of claim. The owner
failed to pay, the contractor sued, and the district court granted summary judgment in
favor of the owner.
On appeal, the Wyoming Supreme Court found the mandatory claim procedure in
the contract to be clear and unambiguous. Giving the contractor every favorable
inference, the last day for filing a claim was September 10, 1993, 6 days before the
contractor's claim. Finding no evidence that the owner agreed to waive the requirement of
timely written notice, the Supreme Court affirmed the entry of summary judgment. 929
P.2d at 1232-33.
In Ida Grove Roofing, the city hired the contractor to replace a roof on the city
water works plant. The city estimated in the plans that the thickness of the roof insulation
to be removed was 2 to 6 inches. After commencing the work, the contractor discovered
that the insulation was up to 12 inches thick. In affirming the trial court's denial of
additional compensation, the appellate court noted:
"Whether or not the condition was concealed and did not become apparent until
work began on the third section, a change order was required by the contract before
additional compensation would be allowed. . . .
. . . .
After discovering the additional thickness of the insulation on the third section, the
plaintiff did not stop work and obtain a change order, but instead allegedly told the
18
engineer additional compensation would be sought and later sent a letter." 378 N.W.2d at
314-15.
In Enviresponse, the contractor was hired to clean up contaminated waste at the
site where a convention center was being constructed. The contract provided that any
increase in the amount of work to be done would be paid for on a per-unit basis. The
contractor uncovered more waste than anticipated and orally notified the owner before
proceeding with the work, but failed to submit a written change order for approval. In
affirming summary judgment against the contractor, the Ohio Supreme Court stated:
"It is universally recognized that where a building or construction contract,
public or private, stipulates that additional, altered, or extra work must be ordered in
writing, the stipulation is valid and binding upon the parties, and no recovery can be had
for such work without a written directive therefor in compliance with the terms of the
contract, unless waived by the owner or employer. [Citations omitted.]" 78 Ohio St. 3d at
360-61.
It has long been public policy in Kansas that "'freedom of contract is not to be
interfered with lightly.' [Citations omitted.]" Idbeis v. Wichita Surgical Specialists, P.A.,
279 Kan. 755, 770, 112 P.3d 81 (2005). In the case now before us, the district court
accurately stated:
"If the language of a contract is clear and unambiguous, the parties to a lawful contract
are entitled to have it enforced as written. See Endicott v. DeBarbieri, 189 Kan. 301, 304,
369 P.2d 241 (1962). 'Parties are free to contract for any type of . . . notice they desire,'
and when a type of notice is specified, 'the provision is to be enforced as written, whether
it results in actual notice or not.' Fourth Nat'l Bank & Trust Co. [v.] Mobil Oil Corp., 224
Kan. 347, 354, 582 P.2d 236 (1978)."
19
In Fourth Nat'l Bank & Trust Co. v. Mobil Oil Corp., 224 Kan. 347, 582 P.2d 236
(1978), the court strictly construed the requirement that stockholders tender their shares
by a certain date to satisfy the terms of a stock purchase offer. As Razorback aptly points
out, the notice of tender required for the stock tender is a far cry from the notice
requirement in a construction contract. However, our Supreme Court in Mobil, 224 Kan.
at 353, made the following general observations regarding Kansas contracts:
"The basic legal principles here applicable are well expressed in 17 Am. Jur. 2d,
Contracts, § 242 pp. 627-629 (1964):
"'It is a fundamental principle that a court may not make a new contract for the
parties or rewrite their contract under the guise of construction. In other words, the
interpretation or construction of a contract does not include its modification or the
creation of a new or different one. It must be construed and enforced according to the
terms employed, and a court has no right to interpret the agreement as meaning
something different from what the parties intended as expressed by the language they saw
fit to employ. A court is not at liberty to revise, modify, or distort an agreement while
professing to construe it, and has no right to make a different contract from that actually
entered into by the parties. Courts cannot make for the parties better or more equitable
agreements than they themselves have been satisfied to make, or rewrite contracts
because they operate harshly or inequitably as to one of the parties, or alter them for the
benefit of one party and to the detriment of the other, or, by construction, relieve one of
the parties from terms which he voluntarily consented to, or impose on him those which
he did not.'"
As most recently stated by our Supreme Court in National Bank of Andover v.
Kansas Bankers Surety Company, 290 Kan. ___, Syl. ¶ 2, ___ P.3d ___ (No. 95,548,
filed March 5, 2010):
20
"Competent parties may make contracts on their own terms, provided such
contracts are neither illegal nor contrary to public policy, and in the absence of fraud,
mistake, or duress a party who has entered into such a contract is bound thereby."
Razorback relies upon the holdings in National Union Fire Ins. Co. v. FDIC, 264
Kan. 733, 957 P.2d 357 (1998); Reger v. Sours, 181 Kan. 423, 311 P.2d 996 (1957);
Oliver Farm Equipment Sales Co. v. Patch, 134 Kan. 314, 5 P.2d 795 (1931); and
Almena State Bank v. Enfield, 24 Kan. App. 2d 834, 954 P.2d 724 (1998).
In Almena, the Bank made a mortgage loan to the Enfields. The note required the
Enfields to provide the Bank, upon request, any financial statements or information the
Bank deemed necessary. The Enfields made all their required note payments, and the
note was never criticized or classified by the bank examiners. However, the Bank called
the note when it requested copies of the Enfields' income tax returns and the Enfields
refused to supply them.
The next day, the Enfields brought their tax returns to the Bank to be examined but
would not permit the Bank to copy them. At the same time, the Enfields furnished to the
Bank their 1995 financial statement. The Bank then brought this foreclosure action. This
appeal followed the entry of summary judgment in favor of the Enfields.
In reversing the district court, the court on appeal considered whether the doctrine
of substantial performance applied. The court declared that:
"'Substantial performance is shown when the following circumstances are
established by the evidence: (1) The party made an honest endeavor in good faith to
perform its part of the contract, (2) the results of the endeavor are beneficial to the other
21
party, and (3) such benefits are retained by the other party.' [Citations omitted.]" 24 Kan.
App. 2d at 839.
The issue in Almena did not involve notice but performance of contract obligations
to avoid breach. Here, the issue is not whether Razorback substantially performed the
work required of it pursuant to the contact. The work was done, and the Board accepted it
and paid Razorback in accordance with the contract. Here, the issue is notice and whether
this court should, as Razorback would have us do, simply disregard Section 10.05D of
the contract.
Reger involved a lease-purchase agreement. The contract did not provide that time
was of the essence. The court found that when plaintiff sought to exercise his option to
purchase, defendant engaged in evasive conduct to prevent plaintiff from tendering
payment. Under the circumstances, plaintiff did not forfeit the right to purchase the
property. Further, "[t]he privilege to declare forfeiture was waived by the acceptance of
the mentioned payments long after plaintiff had been in arrears." 181 Kan. at 426-27.
The issue of waiver is one we will address shortly. In the meantime, we find no
evidence that the Board interfered in any way with Razorback's ability to give proper
notice in accordance with the contract, as was the case in Reger.
National Union Fire involves a certified question from the United States Court of
Appeals for the Tenth Circuit regarding "'whether the notice-prejudice rule which applies
to notice of loss provisions of a fidelity bond would also apply to the bond's proof of loss
requirement.'" 264 Kan. at 734. In resolving the issue, the Kansas Supreme Court noted
the federal district court's observations about the common characteristics shared by
fidelity bonds and insurance contracts and the application of insurance law to a fidelity
22
bond's proof of loss requirement. The district court noted "'the numerous Kansas
decisions holding that insurance policies are to be strictly construed against the carrier
and in favor of the insured when a policy provision is ambiguous.' [Citations omitted.]"
264 Kan. at 749.
Our Supreme Court found "no compelling reason . . . for allowing the insurer to
avoid performing a duty purchased by the insured's premium unless the insured's delay
caused loss to the insurer. This would be true for both notice of loss and proof of loss
provisions in the policy or bond." 264 Kan. at 751.
The language of National Union Fire is narrow in its focus. An entire body of law
has developed regarding the interpretation and enforcement of insurance policies and
dealings between insurers and their insureds. That body of law has been informed by the
unique characteristics of the insurance industry and its special relationships with its
insureds. National Union Fire involved a purchaser of an insurance/surety product. The
case before us involves a seller of construction services. The distinctions are too many
and too significant to paint owners in construction contracts with the same brush used for
insurers in dealing with their insureds.
In Oliver Farm Equipment Sales, Oliver sold a threshing machine to Patch on
credit, taking back a series of promissory notes. Oliver warranted that the thresher "'will
perform the work for which it is intended as well, or better, than any other make of
machine of the same size working under the same conditions and on the same job.'" 134
Kan. at 315. The warranty provided that "'if within five days from its first use, the
purchaser is unable to make the machinery do the work as aforesaid he shall immediately
give written notice.'" 134 Kan. at 315.
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A month after buying the thresher, Patch wrote to the plaintiff, stating: "'It . . .
runs good and all, but the separator man and farmers are kicking about the dirt around the
feeder. I never saw as dirty a machine. . . . Now I expect you to do something about this.
. . . I sure can't use the machine this way.'" 134 Kan. at 315. Over the next 3 years Oliver
sent various repairmen to attempt repairs. When Oliver sued on the notes, Patch
counterclaimed and prevailed on his claim for damages caused by the defective thresher.
On appeal our Supreme Court held that Oliver waived strict compliance with the
notice requirement in its warranty. "[P]laintiff might have ignored defendant's oral
complaint to its agent . . . and might have ignored the written notice. . . . If it had done so,
it might have stood on the letter of the contract." 134 Kan. at 317. But by sending "one
[mechanic] after another . . . to tinker with the machine," Oliver waived its right to strict
compliance with the contract's notice provision. 134 Kan. at 318.
Rather than supporting Razorback's position, Oliver suggests that the plaintiff may
have demanded strict compliance with its notice requirement but waived that right by its
conduct over a 3-year period.
Here, the contract is between knowledgeable and experienced contracting parties.
Section 4.03 of the contract requires the contractor not only to give the owner and project
engineer written notice of conditions on the job site that are materially different from
what was shown in the contract documents, but also to immediately stop work on the site
and proceed no further until receipt of a written order to do so.
Further, Section 10.05 requires the contractor to provide the project engineer
written notice of its claim for extra compensation within 30 days after the start of the
event giving rise to the claim. The contractor must then provide the project engineer with
24
the amount of the claim along with supporting data within 60 days after the start of the
event giving rise to the claim. Section 10.05D makes compliance with these notice
requirements a prerequisite for any claim for additional compensation under the contract.
Razorback first mentioned wet surface conditions in September 2004, but it did
not stop work at that time. The Board certainly was not on notice of any possible claim
for extra compensation since wet surface conditions would clearly be within the
contemplation of the contracting parties as outlined in the Board's April 30, 2004, letter
to bidders.
At the October progress meeting, Razorback did not notify the project engineer
that it would be making a claim to increase the contract price due to the wet conditions on
the site.
In February 2005, Razorback made a request for a change order with respect to the
time for performance but not for extra compensation. It made no request for additional
compensation until June 2005, when the project was completed and almost 2 months after
its originally scheduled completion date. When it did demand additional compensation, it
tendered a one-page document without supporting data that merely identified its claimed
"Actual Sanitary Sewer Cost" of $3,286,009 less its "Sanitary Sewer Cost Estimate" of
$1,943,077 to arrive at $1,342,932, the amount claimed.
Razorback clearly failed to comply with the notice requirements of Sections 4.03
and 10.05. It gave its formal written notice about 9 months after the wet conditions were
first encountered. Before its written notice it had never expressed, orally or otherwise, its
intent to seek additional compensation for these wet conditions. The Board was entitled
to notice in accordance with the provisions of the contract that the parties freely and
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voluntarily entered into. Accordingly, the district court correctly ruled that there
remained no genuine issue of material fact regarding Razorback's failure to perform in
accordance with the contract terms.
WaiverI
Razorback's waiver contention is rather confusing. Razorback contends that the
district court erred in relying on Owen v. City of Bartlett, 215 Kan. 840, 528 P.2d 1235
(1974), and Saddlewood Downs v. Holland Corp., Inc., 33 Kan. App. 2d 185, 99 P.3d
640 (2004), in finding there had been no waiver of the contract's notice provision.
Razorback states that Owen and Saddlewood "involve a completely different context for
waiver." Yet Razorback does not provide any analysis to support the existence of a
waiver, other than its conclusory remark that "[t]here is a fact dispute over whether the
Board's acceptance of Razorback's tardy written notice of a claim for additional time and
the Board's initial action on Razorback's oral claim for a contract price adjustment are so
'isolated' as to preclude waiver." A point raised incidentally but not briefed or argued is
deemed abandoned. See Kingsley v. Kansas Dept. of Revenue, 288 Kan. 390, 395, 204
P.3d 562 (2009); Cooke v. Gillespie, 285 Kan. 748, 758, 176 P.3d 144 (2008).
Nevertheless, we will address the issue.
The district court observed that in Owens "the parties, throughout the performance
of the contract, entirely disregarded the writing requirement for extra or additional work."
Razorback does not attempt to distinguish Owens by directing us to evidence that the
Board consistently disregarded the notice requirements of the contract. Rather, it directs
us to one event in February 2005, which we will address shortly.
26
With respect to Saddlewood, the district court noted the fact that the owner had
expressly authorized extra work and had paid for it. From these cases, the district court
concluded that "an isolated instance of failing to enforce a contractual requirement is not
enough to establish a waiver of that requirement." Razorback does not argue that this is
an incorrect statement of the law of waiver or that there was a consistent pattern of the
Board waiving the contract's notice requirements.
Waiver is the intentional relinquishment of a known right. Postal Savings & Loan
Ass'n v. Freel, 10 Kan. App. 2d 286, 287, 698 P.2d 382 (1984). Waiver may be inferred
from conduct. See Lyons v. Holder, 38 Kan. App. 2d 131, Syl. ¶ 7,163 P.3d 343 (2007).
However, in order to establish waiver there must be evidence that manifests, in an
unequivocal manner, an intent that is inconsistent with the intent to claim a right. See
Patrons Mut. Ins. Ass'n v. Union Gas System, Inc., 250 Kan. 722, 725-26, 830 P.2d 35
(1992). Therefore, in order to create a genuine issue of material fact on the issue of
waiver and thereby avoid summary judgment, it was incumbent upon Razorback to direct
the district court (and us) to evidence from which a jury could conclude that the Board, in
an unequivocal manner, manifested its intention to relinquish its right to written and
timely notice of any claim for additional compensation in accordance with the contract's
terms.
Razorback refers us to the late written notice it gave the Board of its claim for
additional time to complete the work. The Board rejected Razorback's oral requests to
extend the contract's performance deadlines in December 2004 and January 2005. On
February 23, 2005, Razorback gave written notice of its request for a change order
extending the contract performance date an additional 60 days. Razorback asserted no
claim for additional compensation. On April 19, 2005, the Board extended the date for
completion and final acceptance of the work to June 14, 2005.
27
The Board rejected Razorback's oral attempts to extend performance until written
notice was given in February 2005. Further, the right to insist on timely completion of the
work is clearly distinct from the right to receive timely notice of a claim for additional
compensation for the work. We fail to see how this one extension of Razorback's
performance time constitutes evidence that unequivocally manifested the Board's intent
to relinquish its right to timely, written notice of a claim for additional compensation. If
the Board did demonstrate in an unequivocal manner its intent to waive written notice by
accepting Razorback's February 23, 2005, time extension request, and if this notice
waiver extended to a claim for extra compensation (which Razorback did not ask for at
the time), then Section 10.05 of the contract nevertheless required Razorback to follow-
up with supporting data on its claim within 60 days thereafter. There is no evidence that
Razorback did so.
Accordingly, we are convinced that the district court was correct in finding no
genuine issue of material fact on the claim that the Board waived its right to timely
written notice of Razorback's claim for additional compensation.
Affirmed.