November 2000 |
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In This Issue
Contractor Recovers on Differing Site Condition ClaimMany architects and engineers preparing contract documents for owners are fond of including provisions imposing a duty on bidders to closely examine the site and attempting to disclaim any liability for the subsurface information provided to bidders such as soils borings and reports. Contractors believe that it is impractical to conduct a subsurface investigation pre-bid or to include a contingency for this unknown risk in the bid, particularly when the contract contains a differing site condition clause (promising to pay extra if a materially different and unanticipated condition is encountered). The Court of Appeals for the Tenth District recently ruled that a contractor's failure to perform a pre-bid inspection did not preclude a recovery for a differing site condition on a subsurface condition that could not be revealed on a site visit. Sherman R. Smoot v. State, No. 98AP-1497, 2000 Ohio App. LEXIS 180, 2000 WL 64310 (Ohio App. 10th Dist. Jan. 27, 2000). In finding the disclaimed soils report subject to the Spearin warranty (the owner impliedly warrants the sufficiency of the plans and specs), the Court observed:
The Court ruled that the Spearin doctrine (owner's implied warranty of design) applies even if the soils report was not a part of the contract documents and "for information only." This case follows the prevailing trend that disclaimers are ineffective if the contract contains the usual differing site condition clause and the contractor encounters unanticipated site conditions. No Damage for Delay" Clause Imposed Under Odd FactsAt least prior to the Fairness in Construction Contracting Act, which became effective to contracts dated on or after September 30, 1998, "no damage for delay" clauses are generally enforceable if unambiguous - but there are so many exceptions to the general rule that contractors are often able to recover delay damages despite such clauses. A recent Court of Appeals decision from Cleveland upheld a "no damage for delay" clause and barred a contractor's recovery for unforeseen utility lines and resulting costs. Digioia Bros. Excavating v. Cleveland (1999), 135 Ohio App. 3d 436. In the Digioia case, two very odd facts were present which normally do not occur. First, the City had already paid the contractor for the differing site conditions in change orders. Second, the contractor's estimator had included additional costs in his bid to cover the risk of unforeseen utility lines. The Court held that the contractor had therefore not relied upon the information in the arguably erroneous plans and specifications. If the contractor had testified that he had relied upon the site information contained in the plans and specifications, and did not include a contingency in his bid for such utility interferences, there would likely have been a different result. Sub May Have to Pay Defense Fees Under Hold HarmlessOhio has an anti-indemnification statute that prohibits one party to a construction contract (i.e., subcontractor) to be required to indemnify another (i.e., general contractor) from his own negligence resulting in personal injury or property damage. Ohio Revised Code §2305.31. However, this anti-indemnification statute does not necessarily mean that the promising party (i.e., subcontractor) will not have to pay the legal fees to defend against such a claim against the other party (i.e., general contractor). A recent decision by the Ohio Supreme Court found that a hold harmless clause obligates the subcontractor to defend the contractor from claims against the contractor arising from the subcontractor's work or to pay such fees. Kemmeter v. McDaniel Backhoe Serv. (2000), 89 Ohio St. 3d 409. This case re-emphasizes the need for contractors and subcontractors to closely scrutinize indemnification clauses and to see that any risks are properly insured with appropriate contract liability coverage. Zero Unit Price Did Not Invalidate Bid to ODOTODOT is to award highway contracts to the "lowest, competent and responsible bidder." O.R.C. §5525.01. In a recent bidding dispute, the low bidder apparently submitted a defective bid bond and failed to price the "clearing and grubbing" unit price line item. ODOT treated this blank as a zero cost item and the low bidder agreed to do the work for this price. The Court of Appeals upheld the Trial Court's decision that these irregularities did not render the bid non-responsive because acceptance of the total cost bid (with zero for the omitted line item) was not a substantial error giving the low bidder a competitive advantage. The Court also ruled that any deficiency in the bid bond became moot once the low bidder agreed to perform the work. This case demonstrates the considerable discretion that public owners have in waiving or curing bidding irregularities so long as the competitive nature of the bid is not disturbed. Smith & Johnson Construction Co. v. ODOT (1998), 134 Ohio App. 3d 521. CreditsKegler, Brown, Hill & Ritter's Construction Law Newsletter is prepared by Donald W. Gregory for the Construction Law practice group. To subscribe to any Kegler Brown publication, please use our Subscribe Form. To unsubscribe from any Kegler Brown publication, please use our Opt-Out Form. This publication, as well as an archive of previous publications, is also available from our Publications Archive. The Construction Law Newsletter is designed to provide general information about the subjects discussed. It is not meant to be all-inclusive or comprehensive. Kegler Brown is not rendering any legal or professional advice by way of this publication. © 1989-2008, Kegler, Brown, Hill & Ritter Co., L.P.A.
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