Wednesday, April 28, 2010

Can A Contractor Reserve A Claim While Accepting Final Payment?

Under the terms of virtually every construction contract ever drafted, the contractor’s acceptance of final payment operates as a waiver and release of any existing claims. A Texas contractor recently tried to have it both ways. The contractor submitted an invoice for the contract balance. But, the transmittal letter said the contractor reserved its rights under an existing,
unresolved differing site condition claim. The owner issued a check for the invoiced contract balance and the contractor deposited it. The contractor then argued that this had not been true “final payment” because the reservation of rights letter notified the owner that the contractor expected additional compensation.

Is there any way a contractor can legally and ethically accept final payment without releasing existing claims -- and a bar against future claims? This language is consistent with a general rule of contract law. The project owner is entitled to closure. It is a final payment.

As always, I invite your comments below on this topic.

Don't miss next week's issue of Construction Claims Advisor:
Retainage of Disputed Change Order Amounts Upheld
Contractor Lost Rights against Sub’s Performance Bond
Bid Disqualified Due to Incomplete Questionnaire

Bruce Jervis, Editor
Construction Claims Advisor

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