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Vol. 2006-08 August, 2006

Punitive Damages Awarded Contractor; Municipality's Breach of Contract
(Part 1 of 2)

The Arbitrator's decision and award in favor of the General Contractor ("GC"), vindicated the Contractor's flawless 40 year reputation, and imposed Attorney's fees as punitive damages, along with arbitration expenses and fees against the Village of Grafton, Lorain County, Ohio.

The claims arose when Grafton's building addition and renovation of the Village Hall project was almost 99% completed in November, 1999. Grafton moved into and occupied the building, then failed and refused to pay its contractor timely, terminated the GC, ostensibly "for cause", also alleging delay damages. The Village next called in the GC's bonding company alleging failure of performance by the contractor, and demanded damages of the GC, several times the entire contract amount!

"PDG", the Village's Architect-Engineer ("A-E"), had prepared the drawings and specifications that were shown, during hearing, to be incomplete, contained errors and were defective as to subsurface waterproofing and drainage provisions for the elevator pit, resulting in the State's Elevator Inspector citing the A-E for defective design. When the GC requested directions for correcting the construction document deficiencies as to the leaking elevator pit, PDG's field representative refused to offer any direction, threatening termination of the contractor. Without any definitive direction by the Architect, required by the contract, delay ensued and the contractor was unable to make any corrections, whereupon the Architect recommended notice and termination, which the Village endorsed and enforced.
Grafton's Village Administrator, without public bid, next awarded direct contracts for rework and repairs to another contractor ("GC2") and attempted to backcharge the original GC for the GC2's repair work. The Village's awards to GC2 also included significant rework and betterments, including a complex subsurface drainage structure not included in the original design by the A-E. Grafton also called in the GC's bonding company, alleging default and delay by the GC. The bonding company, without conducting any detailed investigation, paid all of the outstanding claims of subcontractors and suppliers. Its separate court action against the GC, to recover its expenditures and attorney fees under its bonding contract, is pending in the Common Pleas Court of Lorain County.

"I think there is a world market for maybe five computers."

- Thomas Watson, Chairman of IBM, 1943

AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness (Forensic Architect). His office is in Cleveland, Ohio.

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