The Effective 48-Hour Notice

by John McGill, Special Counsel at Archer Norris

There are some important provisions in any construction subcontract: the indemnity language, warranty requirements, payment, change orders and claims, and the 48-Hour Notice provision.  The 48-Hour Notice provision is sometimes omitted completely but even where it is included, it is simply not well worded.  Even if it is well crafted, the Notice is not always used properly.  The 48-Hour Notice needs to be clear and it needs to be used properly or it will be ineffective, or worse, result in unintended consequences that could put the General in a breach situation.

The 48-Hour Notice is a written warning that the sub is not performing and that if performance is not completed or at least commenced in some meaningful way, the General will undertake the work, or will hire someone to undertake the work, and will hold the sub accountable. The subcontract language should be clear about how the 48-Hour Notice will be provided (always in writing) and what the repercussions will be if the problem is not resolved.  This last part is important.

If your subcontract has a 48-Hour Notice provision (by the way, it can be 72-Hour or any other reasonable time) you want to identify the options you can employ if the directive in the Notice is not satisfied.  Some typical options are 1- the sub can be terminated; 2- the sub’s crew can be supplemented and those costs backcharged to the sub’s account; 3- the sub can be assessed liquidated damages; and/or 4- any other remedy you want to employ for failure to comply with the 48-Hour Notice. 

The provision should also provide that in the event of termination, the subcontractor would not be paid until all costs and impacts of the failure to perform are known and then only if there is anything left on the sub’s contract balance.  Whatever option you want to exercise for failure to satisfy the 48-Hour Notice though needs to be identified in the contract.  Those will be your only options, so be clear what they are.

The 48-Hour Notice should always be in writing- letter, fax, e-mail- and the more specific the directive the better.  What exactly does the sub need to do?  Do they need to get more men on the project, do they need to have a particular task completed by a certain date, do they need to provide you with submittals or materials on site? 

The 48-Hour Notice needs to be specific in order to be effective.  This is critically important.  It makes no sense to direct the sub to ‘man the job and complete the work’.  What exactly does that mean?  If the sub brings out 2 men but needs 20, they have technically “manned the job”. What does it mean to complete the work? All of the work, the present phase, the present task- what?  Be clear about what you want the sub to do.

A 48-Hour Notice should identify specific areas and specific results that need to be completed within a specific period of time.  The sub should have the option to proceed with the work in the way that it wants, but it should also be clear in the Notice that however the sub proceeds, the required end result must be met.  It also goes without saying that the end result needs to be reasonable; you cannot demand the impossible.

The Notice should also clearly state what the ramifications for non-performance would be.  If you send a 48-Hour Notice, you need to be prepared to act.  If the Notice is properly sent, and assuming it contains all of the required information about what needs to be done to cure the problem, then if those things are not done, or if they are not done according to the Notice, there need to be consequences. 

What should never happen is that the General sends a series of 48-Hour Notices for the same thing. Remember the story of the boy that cried wolf.  If a 48-Hour Notice is sent, and then sent again and again, the subcontractor is arguably within its rights to ignore it.  Certainly any termination of a sub based on repeated 48-Hour Notices that were ignored by the sub, and not acted on by the General either, could just as likely be construed as a material breach by the General as by the sub. 

In short, you should have a 48-Hour Notice provision in your contract.  It should be clear how and when it will be used and what the consequences will be if it is ignored.  If you send a 48-Hour Notice make sure it is clear what it will take to cure it; that is, make sure it is clear what you want done.  Make sure the required action is reasonable and can be accomplished.  If the Notice is sent but there is no response, make sure there are consequences.  Do not send repeated Notices for the same work. Be prepared to exercise your options or don’t send the Notice in the first place. 

From the subcontractor’s perspective, if you get a 48-Hour Notice, respond to it.  Either dispute it or act on it, but do not ignore it.  Non-performance is a breach of contract and continued non-performance is a material breach.  You do not want to be in material breach of your contract- ever!

Bio: John McGill represents general contractors and subcontractors in contract, claims, employment, and transactional matters in before administrative agencies and in judicial proceedings as well as in mediation and arbitration. He is general counsel for a public works general contractor in Novato and Special Counsel at Archer Norris in Walnut Creek.   His contact info is: jmcgill@archernorris.com- direct office - 925-952 5403 & cell- 707 337 1932.

 

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