Senate Committee Passes Fairness in Construction Contracting Bill as S.B. 71
Kegler Brown Construction Newsletter November 1, 2007
The Senate Commerce and Labor Committee has unanimously passed the Fairness in Construction Contracting Bill (S.B. 71).
This bill was originally introduced in March of 1995 as S.B. 106 (now S.B. 71), and passed the Senate 32-1 during the last session, but ran out of time before a vote could be taken in the House of Representatives.
After extensive discussion, negotiation and drafting, the general contractors of the State represented by AGC-Ohio and the subcontractors represented by the Ohio Subcontractors Council (acting for all Ohio ASA chapters) have reached agreement on a compromise and consensus industry bill - Sub. S.B. 71 (Fairness in Construction Contracting Bill), which is now moving through the State Senate.
This legislation is designed to remedy certain inequities in construction contracting created by adverse court decisions or unfair practices within the industry, and contains the following elements:
- Requires subcontractors and suppliers to provide a Notice of Furnishing to preserve bond rights (as is the current law for mechanic"s lien rights). This will prevent "hidden bond claims" and make bond claims consistent with mechanic's lien claims.
- Prohibits as against public policy:
- waiving bond rights by contract without payment (to eliminate the "Farrell" problem);
- waiving pending claims by final payment; and
- "no damage for delay clauses" (when the delay is caused by the owner's or contractor's actions or inactions).
- This will prevent one from inadvertently giving up important legal rights by virtue of one-sided contract language hidden in the fine print of lengthy non-negotiable construction contracts.
- Allows subcontractors and suppliers to file mechanic's lien and bond claims within the deadlines provided by law, despite the existence of contingent payment clauses. This will prevent "pay-if-paid" clauses from interfering with the filing of lien and bond claims which are necessary to secure payment.
These provisions should cause a more equitable sharing of risk in the construction process by encouraging the party most able to manage or control that risk to remain responsible for it.