State Loses Royal Electric Appeal
Kegler Brown Construction Newsletter May 1, 1994
The Royal Electric decision from the Court of Claims, which was a very pro-contractor decision against the State of Ohio (see May, 1993 Newsletter) has now been upheld on many of the important issues by the Court of Appeals. Royal Electric v. OSU, Case No. 93AP-399 (12/21/93). The Court of Appeals ruled that the State's contract did not contain a true "no damage for delay" clause and that in any event such a provision could only be enforced if the delays were foreseeable by the contractor. The Court also stated that the Eichleay formula could be used to calculate delay damages if the contractor proved that the delay caused some portion of his home office overhead to be unabsorbed. The Court stated further that lost profits due to diminished bonding capacity might be recovered if they could be proven with reasonable certainty.
While this decision is very favorable to contractors, it is unclear what its effect might be on future state projects in that the State revised its contract documents in September, 1993 to provide a clearer "no damage for delay" provision in an effort to mitigate the effect of this and similar decisions.