Ruling Continues Trend of Courts Strictly Construing Terms of Construction Contract
The Franklin County Court of Appeals in June continued the trend of Ohio Courts in recent years strictly enforcing the terms of a construction contract, even if the resulting outcome seems unjust or inequitable.
In Cleveland Construction, Inc. v. Kent State University, the court decided litigation arising out of the construction of four residence halls on the main campus of Kent State University ("KSU"). During the course of the project, Cleveland Construction, Inc. ("CCI") was delayed by, among other issues, weather and a labor strike. After trial, the Ohio Court of Claims awarded CCI damages of $3,029,732.60, plus prejudgment interest.
In reversing that decision in part and affirming it in part, the Franklin County Court of Appeals made two rulings which impact those involved in construction. First, it reiterated the principle that courts will strictly construe the claim notice requirements of a construction contract. That holding, however, had no impact on CCI's claim, as counsel for KSU had acknowledged during trial that notice was not an issue.
The second ruling involved the contractually required administrative remedies. In the 1993 decision of Conti Corp. v. Ohio Dept. of Ad Serv., the Franklin County Court of Appeals had ruled that a contractor did not have to exhaust its administrative remedy under Article 8 of the state's contract, which required a contractor to appeal a claim denial to essentially the same persons who had already reviewed and ruled against the claim. The court at that time had held such a step to be a "vain act" - - essentially a waste of time.
In CCI's case, however, the Court of Appeals explicitly overruled Conti and held that a court did not have the power to rewrite the contract. Since the contract provided an administrative remedy, the court required that the administrative process be followed to its conclusion. The case was sent back to the trial court to determine whether CCI had fully complied with the administrative remedy, and, if not, the impact.
This decision is one more in a line of cases which stand for the principle that a contract consists of what the parties agree and, in the absence of ambiguity, courts will enforce its explicit terms, even if the contract terms or resulting outcome seem unfair. All involved in construction projects must recognize that the clear language of a contract is what they should expect courts to enforce.