Ohio appellate court upholds waiver of claims clauses

Reprinted from the Spring 2016 Bricker Construction Law Newsletter. Download the complete Spring 2016 BCL.

An Ohio appellate court recently held that by failing to comply with contractual notice requirements, a contractor waived its right to bring claims associated with the contract.

In IPS Electric Services, LLC v. University of Toledo, Case No. 15AP-207, 2016-Ohio-361, the University of Toledo (UT) hired IPS Electric Services to perform electrical work on existing buildings and within remodeled building space at the UT Health Science Campus. Problems arose throughout the project, which caused the required completion date to be pushed back. In a number of letters to the university, IPS asserted that these delays were caused by the university’s late delivery of materials or the university’s slow response time to IPS communications. Most of these letters stated that IPS was incurring “additional costs” without providing a specific amount.

IPS then sent the university a more detailed letter asserting that their claims totaled nearly $500,000 and later sued UT for breach of contract. The university asserted that IPS had failed to meet the claims requirements under the “Dispute Resolution” sections of the parties’ contract. These provisions provided that a failure by IPS to properly initiate, substantiate or certify claims arising from the contract would result in an irrevocable waiver of those claims. The Court of Claims found these provisions controlling and entered judgment in favor of the university.                                                                                        

IPS appealed and argued that the contract provisions relied upon by the university were unlawful “no damages for delay” clauses. (A “no damages for delay” provision is one that prevents a contractor from recovering damages where a delay was caused by the public owner.)  However, the Tenth District did not agree with IPS. The court noted that Ohio law prohibits “no damages for delay” language that bars claims based on the substance of the claim. Here, the provisions limited or barred a contractor’s claims for failing to comply with procedural requirements. 

IPS also asserted that it failed to meet the procedural requirements, because it did not know the extent of its damages until the end of the project. Again the court disagreed, stating that IPS did not need to know the total damages in order to comply with the contractual notice requirements and inform the university of its claims.

This case confirms that a contractor can waive its right to claims for additional time or money, if the contractor fails to meet the notice requirements in the contract.