Construction law and business litigation attorney Mark F. Craig reports that the Ohio Supreme Court upholds a “no damages for delay” clause in Dugan & Meyers Constr. Co., Inc. v. Ohio Dept. of Adm. Servs., 2007-Ohio-1687. Plaintiff Dugan & Meyers (“D&M”) was terminated on a public project at the Ohio State University and was assessed liquidated damages for 188 days of delay in completion, apportioned between D&M and three subcontractors.
D&M brought suit in the Court of Claims to recover its cost overruns, alleging that the additional costs were due to inaccurate plans and specifications provided by the public owner. The referee in the Court of Claims agreed, finding that under the 1918 U.S. Supreme Court decision, Spearin v. United States, D&M was entitled to rely on the accuracy of owner-provided plans and specifications. The Court of Claims agreed with the referee’s recommendations and granted judgment in favor of D&M.
The state appealed to the 10th District Court of Appeals, who reversed the judgment on the basis that all of D&M’s cost overruns were a direct result of delays on the project, which were precluded by D&M’s failure to give contractual notice, thereby waiving any damages arising from the delay. The Court of Appeals also held that D&M failed to provide competent evidence of actual damages.
The Ohio Supreme Court affirmed the 10th District’s ruling, holding that the “no damage for delay” clause was enforceable because the contract clearly provided that “time is of the essence” and provided a specific procedure to be followed in the event of a delay, which was not followed by D&M. The Court noted that the contract pre-dated the “Fairness In Contracting Act” of 1998 in which the Ohio State Legislature made such clauses void and unenforceable as against public policy in most instances. R.C. 4113.62(C). The 1998 legislation includes specific language stating that its provisions do not apply “to any contracts, agreements, or understandings entered into before the effective date of this act.”
The Court also noted that Spearin involved the existence of a site condition that precluded completion of the construction project and distinguished this case on the basis that “the case before us concerns the allocation of damages flowing from delay in completion of a construction project due to plan changes.” “[W]e decline the opportunity to extend the Spearin Doctrine from job-site-condition cases to cases involving delay due to plan changes.”