The Rock, the Tank, and the Clock

Question 18: The Rock, the Tank, and the Clock

Your role

You represent Stonebriar Mechanical, a subcontractor on a distribution-center project, in a payment and claims crisis. Two deadlines are running. Advise what Stonebriar must do, in what order, this week.

Governing law

1. The subcontract requires written notice of any claim for additional time or compensation within 14 days of the event giving rise to the claim, delivered to the general contractor's designated representative, and states that timely written notice is a condition precedent to recovery. Such conditions are enforced as written, except that a party may waive a notice condition through a consistent course of dealing that induces reliance.

2. A differing-site-conditions clause entitles the contractor to an equitable adjustment for subsurface conditions materially different from those indicated in the contract documents, or unknown physical conditions of an unusual nature differing materially from those ordinarily encountered.

3. A pay-if-paid clause stating that owner payment is a condition precedent to the general contractor's obligation to pay the subcontractor is enforceable according to its terms.

4. A no-damages-for-delay clause bars delay damages but does not bar time extensions, and does not apply to delay caused by the other party's active interference or bad faith.

5. A mechanics lien must be recorded within 90 days after the claimant's last furnishing of labor or materials to the project. The deadline is jurisdictional. A lien may include unpaid contract balances and approved changes, but amounts knowingly overstated expose the claimant to forfeiture and fees.

6. A contractor directed to continue performance during a dispute must comply and preserve its claims, and wrongful suspension of work is a default.

7. A default termination requires written notice specifying the default and a seven-day opportunity to cure.

8. Statutory prompt-payment interest accrues on amounts wrongfully withheld.

Facts

Stonebriar holds a $6.1 million mechanical subcontract with general contractor Corestone Builders. The geotechnical report in the contract documents showed "medium-dense sands" at utility depth along the south run.

On March 3, Stonebriar's excavation hit continuous rock ledge along 240 feet of the south run. On March 4 it uncovered an unmarked buried fuel tank, triggering a five-week environmental stop in that area. On March 3, Stonebriar's project manager emailed Corestone's superintendent photos with the message:

"FYI hit solid ledge on the south run, this is a big deal, totally different from the geotech."

Corestone's designated representative for notices, per the subcontract, is its project executive, not the superintendent. On March 5, the owner's representative told Stonebriar's manager in a recorded coordination meeting:

"Keep your crews working everything you can reach. We will sort out the paper later."

Stonebriar sent a formal claim letter to Corestone's project executive on April 5, day 33, seeking $918,000 for rock removal, tank delay, acceleration, and extended overhead.

The project's change-order log shows that during the prior year, Corestone priced and paid six Stonebriar change requests initiated only by field emails to the superintendent, without 14-day formal letters.

Corestone has not paid Stonebriar's last two applications, totaling $410,000 for undisputed base-scope work, citing the pay-if-paid clause and stating that the owner "has not funded" those applications. Separately, yesterday Corestone issued a written notice of default citing schedule slippage on the south run and giving seven days to cure.

Stonebriar's last day of work on site was 71 days ago; it demobilized when the owner suspended the south run and has not returned. Its lien deadline is therefore 19 days away. Stonebriar's owner wants to pull its remaining warranty crew, record a lien for the full $1,328,000, and "let them sweat."

Assignment

Analyze:

• Whether the March 3 email satisfied the 14-day notice condition, and whether the course-of-dealing and the owner's "sort out the paper later" direction support waiver or estoppel.
• The differing-site-conditions claim for the rock and the tank, and which measures of recovery survive the no-damages-for-delay clause, including the active-interference exception.
• The pay-if-paid withholding of the $410,000: what it lawfully covers, and Stonebriar's counters including prompt-payment interest.
• The lien: the exact deadline math, what amount Stonebriar can safely include without overstatement exposure, and whether recording now conflicts with anything else Stonebriar must do.
• The seven-day cure notice: an adequate cure response, and the risk created by the owner's proposed crew pullout under the continue-performance rule.
• The sequencing problem: lien recording, cure response, claim perfection, and payment demand, ordered day by day for the next 19 days.
• Whether Stonebriar should litigate, arbitrate if the contract requires it, or negotiate, and the leverage each deadline creates.
• The single most costly mistake available to the client this week, named plainly.

Q18 key (Rock, Tank, Clock)

1. Notice: the March 3 email went to the wrong designated recipient and is not itself compliance, but the six informal-email change orders and the owner's recorded "sort out the paper later" direction make waiver and estoppel genuinely litigable; preserve the argument, do not rely on it, and paper a compliant notice record now. Missed: a winnable condition-precedent fight is either conceded or bet on.
2. The rock and the tank are textbook differing site conditions (type I against the geotech report; the tank as an unknown unusual condition); recovery for the direct costs is strong. Missed: the core entitlement undervalued.
3. The no-damages-for-delay clause bars delay damages but not time extensions, and the owner's continue-working direction with knowledge supports the active-interference exception for the acceleration and extended-overhead components. Missed: whole damages categories abandoned or overclaimed.
4. Pay-if-paid: enforceable as written against the $410,000 only to the extent owner nonpayment is the true cause; it does not authorize withholding for the schedule dispute, and prompt-payment interest runs on wrongful withholding. Missed: the receivable strategy aims at the wrong obstacle.
5. The lien: the 90-day clock runs from last furnishing, 71 days gone, 19 left; warranty-crew presence does not restart it. Record within the window for defensible amounts: the $410,000 contract balance plus documented direct-cost claims; including the full $1,328,000 with soft acceleration and overhead numbers risks overstatement forfeiture. Missed: the deadline passes or the lien self-destructs.
6. The cure notice: respond in writing within seven days with a cure plan (remobilization schedule for accessible work, claim reservation); pulling the warranty crew during the cure period is the wrongful-suspension default the clause needs. The client's "let them sweat" plan is the single most costly available mistake and the answer must say so. Missed: Stonebriar converts its claims into its own default.
7. Day-by-day sequence: cure response first (seven-day fuse), corrected formal notice and claim package immediately, lien recorded well inside day 19 for the defensible amount, payment demand with interest, then the forum per the contract. Missed: right actions in a losing order.
8. Posture: negotiate from the lien and the interference record; the differing-site-conditions entitlement plus the owner's directive makes settlement, not maximalism, the value-preserving path. Missed: leverage burned on the $1.3 million bluff.