Significantly, five changes in Ohio law, now affect all public and private construction contracts and work. These enactments, under House Bill 71, the Fairness in Construction Contracting Act, were effective 09/29/98. These new laws were made to amend Section 153.56 R.C. and to enact Section 4113.62 R.C. to void various types of provisions in construction contracts or subcontracts considered to be against public policy and to establish new requirements and limitations relative to exercising rights under a payment bond for certain public improvements. The five changes include:
1. PUBLIC WORK; MILLER ACT; NOTICE OF FURNISHING REQUIRED. Under amended 153.56 R.C., a subcontractor or materials supplier supplying labor or materials that cost more than $30,000.00, who is not in direct privity of contract with the principal contractor for the public improvement, must now serve a Notice of Furnishing upon the principal contractor, within 21 days after the first work or materials supplied to the project. If this contractor fails to comply, he has no claim against the principal contractor’s surety bond. If the Notice of Furnishing is served after the 21 day period, the contractor has a right of recovery only to the amounts owed for labor and work performed and materials furnished, during the 21 days immediately prior to serving the Notice of Furnishing.
Under the new Section 4113.62 R.C., various provisions in construction contracts are declared void as against public policy. These include:
2. WAIVER OF SURETY BOND; RIGHTS, VOID. Any provision in a construction contract that waives rights under a surety bond is void and unenforceable.
3. CONTRACTS; “NO DAMAGE FOR DELAY” clauses void, where delay caused by Owner. Clauses providing “no damages for delay” in contracts between the owner and principal contractor are void, if the delay is one proximately caused by the owner’s act or failure to act.
4. SUBCONTRACTS; “NO DAMAGE FOR DELAY” clauses void, where delay caused by Owner, or Contractor. Similarly, clauses providing “no damages for delay” in subcontract agreements are also void if the delay is the proximate result of the owner’s or (upper tier) contractor’s act or failure to act.
5. MECHANICS’ LIEN RIGHTS; RESTRICTIONS PROHIBITED. Finally, contracts making payment contingent or conditioned upon receipt of payment from any other person or entity (e.g. “pay if paid” or “pay when paid” clauses) may not prohibit filing a claim to protect rights under the Ohio Little Miller Act or Mechanics’ Lien statutes.
With the effective date of these new provisions, only a few months ago, additional care must now be taken to review and revise all existing and new construction contracts now being made, to implement conformity and consistency with the new Ohio laws.