Senate Reintroduces Fairness in Construction Contracting Bill as S.B. 71
Kegler Brown Construction Newsletter June 1, 2007
Senator Cupp has reintroduced the Fairness in Construction Contracting Bill (S.B. 71). This legislation initially began as an effort to bar "pay-if-paid" contract language which prevents construction subcontractors who perform satisfactory work from being paid when an owner, for whatever reason, fails to pay the general contractor. There was some initial opposition to this bill from general contractors.
This bill was originally introduced in March of 1995 as S.B. 106 (now S.B. 71). At the request of the sponsor, the construction industry representatives held several meetings and negotiated their differences.
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 have reached agreement on a compromise and consensus industry bill - Sub. S.B. 71 (Fairness in Construction Contracting Bill).
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.
- Clarifies the existing anti-indemnity statute to provide that one cannot force another to pay the attorney's fees and costs arising from a person's own negligence. This will eliminate the inconsistency of making one pay the negligent party's attorney's fees when the existing statute makes it clear the non-negligent party cannot be required to pay for the personal injury or property damage caused by the negligent party.
- Prohibits as against public policy:
a. waiving bond rights by contract without payment;
b. waiving pending claims by final payment; and
c. "no damage for delay clauses" (when the owner or contractor causes the delay).
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.
While there has been some concern expressed by certain utilities and the State with regard to two features of the bill, it 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. The goal of the construction industry is to move the bill through the legislature before the conclusion of this session. If enacted into law, it will dramatically change construction contracting here in Ohio.