Legal Brief

By Russell O'Rourke,Esq.
O'Rourke & Associates, LPA
Are you always responsible for the actions of your subcontractors or suppliers?  If a delay in a project is caused by your supplier, are you ever relieved of the responsibility?

While these two questions are similar, and the answers to each are a qualified "no", they are very different for the reason that the second question adds the possibility that not only is there a potential excuse that would justify a remedy when no other delays from any other party are experienced, the second question anticipates that the delay may coincide with other delays. The second situation is the one that has a number of variations, all of which may impact the outcome of the dispute.  Due to the limited space of this article, the possible situation anticipated by the second situation cannot be adequately addressed here.  The focus of this article is limited to the unusual situation addressed in the case of Carter Steel and Fabricating Company v. Ohio Department of Transportation, decided by the Court of Claims of Ohio on June 29, 1999 and published on January 24, 2000.

ODOT assessed liquidated damages in the amount of $27,600 against the principle contractor, Ohio Concrete Construction Co., Inc., which in turn assessed the entire amount of liquidated damages against Carter.  The only delay in the entire project resulted from Carter's supplier, Nucor Yamata Steel Co.'s failure to deliver steel according to the ODOT specifications.  On two separate occasions the steel delivered was rejected by ODOT.  Carter requested an extension of the contract time, which request was rejected by ODOT.  As a result, with the third steel delivery accepted, the project was substantially completed 46 days late.  The contract between Carter and Nucor Yamato provided that the sole remedy for non-conforming goods was replacement.

In this unusual case, the Court of Claims, noting that it was a case of first impression for it found on behalf of the Plaintiff, the subcontractor, Carter.   Carter's claim was that ODOT wrongfully denied the request for an extension of the contract time and thereafter wrongfully assessed liquidated damages against Ohio Concrete.   Ohio Concrete was not a party to this action.  Carter asserted Ohio Concrete's claim under an assignment of the claim.

The keys to the case are the specifications and suppliers of the steel itself.   The specifications for the bridge construction project in Crawford County required that the steel used was to come from a domestic supplier of the specified steel.  The Court found that it was undisputed that Nucor Yamato was the sole domestic supplier of the specified steel.  Normally, it is the obligation of the contractor to perform and if it chooses to use a subcontractor or supplier to perform a portion of its contractual obligation, it remains responsible for the performance of that subcontractor or supplier.   Further, if the subcontractor or supplier cannot perform, it is the obligation of the contractor to obtain a replacement subcontractor or supplier to perform the obligation.

The argument which the Court found persuasive is that because the specification in effect specifically identified the sole supplier, the performance of the prtion of the contract to be performed by that sole supplier was beyond the control of the subcontractor, Carter and effectively within the control of ODOT.  Carter could not terminate the Nucor Yamato contract and hire a replacement supplier because it was undisputed by the parties that there was no replacement supplier available to Carter.

The Court's findings were so strongly in favor of Carter, that not only did the Court award the full amount of the liquidated damages to Carter, but allowed prejudgements interests at the rate of 10% per annum against ODOT, from the date that ODOT assessed the liquidated damages against Ohio Concrete (prompt pay damages including 18% interest and lawyers fees are never assessable against a project owner on non-Federal construction projects in Ohio).

 
 

 

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