Construction Law

Recent Construction Law Developments

Incorporation of Arbitration Clause
In Acme Arsena Company, Inc., v. J. Holden Construction Co., Ltd., 2008-Ohio-6501, the Cuyahoga County Court of Appeals held that the incorporation by reference of the A201 general conditions in a contractor's subcontract compelled the subcontractor to engage in arbitration for dispute resolution in a dispute with the contractor for extra costs.

For a recent case on piercing the corporate veil for constructon defects, see Business Law discussion of Winegar v. Creekside Crossing Home Sales.

Contract Procedures
In Dugan & Meyers Constr. Co., Inc. v. Ohio Dept. of Adm. Servs., 113 Ohio St.3d 226, 2007-Ohio-1687, the Ohio Supreme Court held that a contractor's delay claims were barred by a "no damages for delay" clause in the contract. The court also said that the contractor was not excused from complying with the change order procedure to get extensions of time. Ohio's Fairness in Contracting Act, which voicds "no damages for delay" clauses, did not apply when this contract was signed.

Construction Managers
In In Wagner-Smith Co.v. Ruscilli Construction Co, 139 Ohio Misc.2d 101, 2006-Ohio-5463, a contractor in a multimillion dollar construction project at the Ohio State University brought this action against the Ohio State University's construction manager for intentional interference w ith the contract between the contractor and the Ohio State University. The Franklin County Court of Common Pleas held that the claim is barred by the economic loss doctrine as set forth in Floor Craft Floor Covering Inc. v. Park Community Gen'l. Hosp. Assn. (1990) 54 Ohio St.3d 1, 560 N.E. 2d 206. Furthermore, the construction manager could not be liable for a tortious interference with contract claim because of privilege: an agent cannot be liable for tortious interference unless that agents actions benefited itself solely in a personal capacity.

Differing Site Conditions
In Allied Environmental Servs., Inc. v. Miami Univ. (Ct. of Claims), 2006-Ohio-5668, an asbestos removal contractor alleged differing site conditions from those set forth in the contract. To prove that type of claim, the contractor must show: (1) that its contract contains an affirmative indication regarding the subsurface or latent physical condition that forms the basis of the claim; (2) that the contractor interpreted the contract as would a reasonably prudent contractor; (3) that the contractor reasonably relied upon the contract indications r egarding the subsurface or latent physical condition; (4) that the contractor encountered conditions at the job site which differed materially from the contract indications regarding the subsurface or latent physical condition; (5) that the actual conditions encountered by the contractor were reasonably unforeseeable; and (6) that the contractor incurred increased costs which are solely attributable to the materially different subsurface or latent physical condition. In this case, the contractor failed to exercise due care in evaluating the work which it underbid. Also, the contractor failed to give timely notice of the allegedly differing condition as required by the contract.

In Trucco Constr. Co., Inc. v. Columbus, 2006-Ohio-6984, the Franklin County Court of appeals held that the contract did not contain a representation of the site conditions, to the excess groundwater claim of the contractor was properly decided against it on summary judgment. Another interesting portion of the case involved Ohio municipal home rule powers. The court said that the Columbus City Charter authorized the adoption of procedures that differed from those contained in RC 153.12 that requires a public owner to pay a "reasonable sum for overhead" if the public entity fails to execute publicy with contracts within 60 days of the bid opening.

Mediation Confidentiality
In O'Donnell Constr. Co. v. Stewart, 2006-Ohio-1838, an owner and a contractor settled a dispute in mediation, by which the owner agreed to pay the contractor $100,000 in exchange for the delivery of certain materials within 30 days. The owner refused to make payment alleging that during the course of the mediation, the contractor had made fraudulent statements inducing the settlement. At trial, the owner sought to compel the deposition testimony of the mediator. The trial court issued a protective order to protect the confidentiality of mediation communications. On appeal, the Court of Appeals affirmed saying that the trial court did not abuse its discretion in applying the statutory confidentiality for mediation communications.

Governmental Immunity
In Hortman v. Miamisburg, 110 Ohio St.3d 194, 2006-Ohio-4251, the Ohio Supreme Court said that when performing a governmental function, people have no right to rely on what the government tells them or promises them, without a contract in writing. The Hortmans alleged that they had suffered damage to trees during a road improvement project by the City of Miamisburg, Ohio. Before the work started, the Miamisburg City Engineer promised them that certain trees would not be touched or destroyed. When those trees were destroyed, the Hortmans brought suit. Reversing the court of appeals, the Ohio Supreme Court found that the City of Miamisburg was immune from liability for the property damage, holding that the doctrines of equitable estoppel and promissory estoppel are inapplicable against a political subdivision when the political subdivision is engaged in a governmental function.

Remedy for Low Bidder
In Cementech, Inc. v. Fairlawn, 109 Ohio St.3d 475, 2006-Ohio-2991, the Ohio Supreme Court, reversing the court of appeals, refused to permit a disappointed low bidder on a public project, who was not awarded the contract despite the low bid, from recovering lost profits as damages. Ohio R.C. section 735.05 requires municipalities to select the "lowest and best" bidder. In dictum, the court stated that a wrongly rejected bidder is limited to injunctive relief.

Pay-If-Paid Clause Upheld
According to Ohio's 10th District Court of Appeals in B.I. Chipping Co. v. R.F. Scurlock Co., (12/20/05) 2005-Ohio-6748, Ohio's Fairness in Contracting Act, RC 4113.65 does not invalidate a contract provision in a subcontractor's contract that limits the subcontractor's delay damages recovery to whatever recovery the contractor is able to secure from the owner.  BI Chipping ("Chipping") was a subcontractor to RF Spurlock ("Spurlock") on a highway job. When Chipping arrived on the job, the DOT had failed to secure the relocation of telephone lines. Chipping requested $25,000 additional compensation.  Spurlock took the claim to DOT who settled Chipping's portion of the claim for $10,000.  Dissatisfied with only $10,000, Chipping sued Spurlock.  The trial court dismissed on summary judgment and the 10th District Court of Appeals affirmed, saying the parties had a right to and did enter into a contract that limited Chipping from recovering anything from Spurlock that Spurlock could not recover from DOT.

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