Construction Law

(See Architect Engineer Law for discussion of 10 year statute of repose enacted by the Ohio General Assembly in 2005)

About requirements for contractors on federal projects to verify citizenship and immigration status of workers, see Business Law Developments.

Recent Construction Law Developments

See: Liquidated Damages in Public Contracts.

Ambiguity in Plans and Specifications
In Suburban Maintenance & Constr., Inc. v. Ohio Dept. of Transp, 2016-Ohio-1253, a referee of the ohio Court of Claims decided in favor of a contractor who made a claim for extras based upon an ambigutiy in the plans and specifications. The contract involved the repair of 12 bridges. Item 202 of the specifications required the removal of "8 CU. YD. PORTIONS OF STRUCTURE .. AS PER PLAN," and stated "the work consists of the removal of top 2 to 3 feet of pier columns for repair." However the specdificaion also said, "the provisions of Item 202 apply except as specified in the following notes." The notes contained the statement that the dimensions are tentative and approximate and that ODOT wil pay for all project work based upon actual dimensions whichh have been verified in the field." The contractor based its bid on a field inspection by its own engineer who found that on the pier columns in question, only patching would be required. ODOT insisted on removal and replacement of the 8 cubic feet. The referee found the specification to be ambiguous and interpreted it against DOT.

Non-Waivable Duty to Build in Workmanlike Manner
In Jones v. Centex Homes, 132 Ohio St.3d 1, 2012-Ohio-1001, the Ohio Supreme Court plowed new ground and created significant new legal issues in construction law that will take years to sort out. In Jones, the plaintiffs alleged that the residential homebuilder from whom they purchased their homes had been negligently constructed using magnetized structural steel that interfered with television reception, erased hard disks, and otherwise engaged in various forms of magnetic mischief. The homebuilder defended based upon a written limited warranty that disclaimed all implied warranties and limited the homeowners remedies.

After analyzing previous case law, the Court concluded that the duty to construct a house in a workmanlike manner using ordinary care is a duty imposed by law and not an implied warranty which can be waived. The previous cases that the court analyzed to reach its conclusion had recognized an implied duty in tort. In Mitchem v. Johnson, 7 Ohio St.2d 66, 218 N.E.2d 594 (1966), home buyers sought compensation for water damage resulting from their house having been built in a low portion of a lot with surface-water problems and without a foundation drainage system. No warranty either covered or disclaimed coverage for the alleged defect. The Court concluded that the home buyers were entitled to recover damages if they could establish that the home builder had not constructed the house in a workmanlike manner.

In Velotta v. Leo Petronzio Landscaping, Inc. (1982), 69 Ohio St.2d 376, 433 N.E.2d 147, the Court found that breach of the implied duty to construct in a workmanlike manner is a tort claim rather than a contract claim, saying,

"The duty implied in the sale between the builder-vendor and the immediate vendee is the duty imposed by law on all persons to exercise ordinary care. In an action by a vendee against the builder-vendor of a completed residence for failure to construct in a workmanlike manner using ordinary care, the essential allegation is, viz., the builder-vendor's negligence proximately caused the vendee's damages. The action, therefore, arises ex delicto, and the four-year statute of limitations set forth in R.C. 2305.09(D) applies. The obligation to perform in a workmanlike manner using ordinary care may arise from or out of a contract, i.e., from the purchase agreement, but the cause of action is not based on contract; rather it is based on a duty imposed by law." [Footnotes omitted, emphasis added.]

In Jones, the Ohio Supreme Court went farther. Normally parties may by contract waive duties between themselves, unless the legislature has made a public policy declaration that the duty may not be waived. In Jones, the Ohio Supreme Court is declared that the duty to build in a workmanlike manner is non-waivable, saying in its syllabus,

"A home builder's duty to construct a house in a workmanlike manner using ordinary care is a duty imposed by law, and a home buyer's right to enforce that duty cannot be waived. Velotta v. Leo Petronzio Landscaping, Inc., 69 Ohio St.2d 376, 433 N.E.2d 147 (1982), paragraph one of the syllabus, and Mitchem v. Johnson, 7 Ohio St.2d 66, 218 N.E.2d 594 (1966), (paragraph three of the syllabus, clarified and followed.)"

Nowhere in the opinion does the Supreme Court explain how it concluded that the duty implied by law cannot be waived. It cites no precedent for that proposition.

Editorial Commentary. Strictly speaking, this surprising new rule of law as stated so far applies only to homebuilders. However, the opinion may have a much greater reach. The traditional duty of any construction trade, residential or commercial, is the duty to perform the construction trade in a workmanlike manner.

1.Will the Jones rule be eventually applied to commercial construction? Typical commercial written warranties are two years. Will this decisions effecitively allow "workmanlike manner" claims outside the written warranty subject to Ohio's four years statute of limitations in R.C. 2305.09?

2. Will the Jones rule apply to home remodelers or other home improvement trades?

3. May warranty obligations, although not waived, be defined and limited by contract as long as the failure to construct in a workmanlike manner is reasonably addressed?

4. Can rights to recover consequential damages beyond the cost of repairs be waived by contract?

5. Can the statute of limitations for claims between the homeowner and home builder be limited by contract to one or two years, as is typical in construction contracts?

6. If the rights can be reasonably limited by contract between the home builder and its customer, what happens if the original home buyer sells to a new buyer? Will the limitation apply to the new buyer?

All these (and no doubt more) seem to the author to be open questions, and fodder for years of litigation.

Contract Claims Procedure
In Ohio Farmers Ins. Co. v. Ohio School Facilities Comm., 2012-Ohio-951, the 10th District Court of Appeals affirmed the grant of summary judgment where a contractor sought additional compensation under its contract, alleging a breach of contract, but had failed to follow the contract procedure for presenting claims. The contract required claims to be in writing and presented to the architect no more than 10 days after the initial occurrence of the facts which are the basis of the claim. Failure to timely submit a claim would constitute a waiver by the contract of any claim for additional compensation.

Editorial Comment: it is sometimes difficult in the course of a construction project to determine "the initial occurrence of the facts" which may later become the basis of a claim. In this case, however, the contractor made no claim under the procedure required by the contract, timely or otherwise.

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 with 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. ยง735.05 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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