Beware of Contractual Dispute Provisions

posted by Michael Fortney  |  Dec 21, 2011 1:56 PM in Construction Law:Contracts and Troublesome Provisions

Beware of Contractual Dispute Provisions

A decision from the Franklin County Court of Appeals highlights the danger a contractor faces by failing to adhere to a contractual dispute provision.  In Stanley Miller Construction Co. v. Ohio School Facilities Commission, Franklin App. No. 10AP-298, 299, 432, and 433, 2010-Ohio-6397, the appellate court reversed an award by the Court of Claims in favor of the masonry contractor in the amount of $404,276 because the court did not adequately review the OSFC’s position that the contractor had waived its claim for an equitable adjustment to the contract by failing to follow the contractual dispute process.

Although the Court of Appeals determined that the evidence clearly showed that construction project was fundamentally flawed and had caused the contractor to incur increased costs, the failure to follow the contractual dispute resolution process may result in a waiver of the contractor’s claims and damages.  In particular, the dispute resolution provision required “Any request for equitable adjustment of Contract shall be made in writing to the Architect, through the Construction Manager, and filed prior to Contract Completion, provided the Contractor notified the Architect, through the Construction Manager, no more than ten (10) days after the initial occurrence of the facts which are the basis of the claim.”  The contractor admittedly did not comply with this requirement.   The contract further warned that “To the fullest extent permitted by law, failure of the Contractor to timely provide such notice and a contemporaneous statement of damages shall constitute a waiver by the Contractor of any claim for additional compensation or for mitigation of Liquidated Damages.”

Although the OSFC had notice of the contractor’s concerns regarding the defective schedule, the Court of Appeals determined that such notice alone was not sufficient to excuse the contractor from complying with the contractual dispute resolution process.   The Court of Appeals concluded that whether or not the contractor was excused from complying with the contractual dispute process was an issue of fact that remained to be resolved by the Ohio Court of Claims.  Consequently, the Ohio Court of Claims will determine whether the failure to adhere to the contractual dispute resolution process cost the contractor its $404,276 damage award.

In both public and private projects, contractors must review and be aware of the contractual provisions in their contracts that govern claim submission and resolution.  A contractor that fails to adhere to the dispute resolution process risks waiving its claims and damages.  For related discussion on this topic see our article “Timely Assertion of Contract Claims is Required.”

 

 


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