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Ohio recognizes the difference between pay-if-paid and pay-when-paid clauses in construction contracts. The pay-when-paid clause represents an unconditional promise to pay a subcontractor within a reasonable time after the general contractor is paid by the owner. A pay-
The state of Ohio’s prompt payment provisions are split into two sections, covering both private and public projects. These statutes govern the timing of all payments on construction projects, and impose penalties for late payment in the form of interest.
- Ohio’s prompt payment laws cover most private construction projects, except the construction or improvement of any single, two, or three-family det...
- A general contractor must typically provide the property owner with a complete, detailed, and accurate estimate of the labor and/or materials furni...
- The timing of payments to prime contractors is not regulated by statute. Therefore, payments must be made according to the deadlines set forth in t...
- A prime contractor or other contractor/subcontractor making payments may withhold amounts necessary to resolve “disputed liens or claims involving...
- Late payments from the owner to the GC, although not regulated by the prompt payment statutes, are still subject to Ohio’s “general interest statut...
- No, prompt payment fees may not be included in an Ohio mechanics lien amount. Lien amounts are limited to the value of labor and/or materials furni...
- Sending a Notice of Intent to Lien along with a Prompt Payment demand letter is generally the best method for encouraging parties to pay. For subco...
- Ohio’s prompt payment statute does not allow any contract clause, including a pay-if-paid clause , to supersede a construction party’s right to col...
- The Ohio public prompt payment provisions apply to all public works projects within the state, with the exception of OH Department of Transportatio...
- Construction Contract Sections to Review For Accuracy
- Clauses in Your Contract to Watch Out For
- Construction Contract Review: Where to proceed with Caution
- Always Read Contracts Carefully
Scope of work
The first section that you should review is the scope of workdescribed in the contract. Make sure that it matches the work that you have offered to perform. Some contracts will provide a detailed description of the work needed, while others may be quite broad. A well-defined scope description helps all parties to the contract know exactly what work is included — as well as excluded.
Contract amount
Make sure that the contract amount matches the amount of your proposal and any agreed-upon alternates or change orders. If changes have been made to the scope of work, make sure that the changes are reflected in the scope description, as well as the contract amount.
Project schedule
Contracts may include a construction scheduleor dates for the project as part of the contract language. If a schedule is included, review the dates for your work carefully. Make sure you have been given enough time to get submittal approval, order materials or equipment, and have them delivered before you start work. Since project completion depends on everyone completing their work on time, it’s especially important to review and discover any schedule changes as early as possible.
‘Pay-when-paid’ or ‘pay-if-paid’
You’ll want to be sure to check the payment clauses in the contract to determine if they include a pay-when-paid or pay-if-paid clause. These clauses attempt to delay payment to lower-tier contractors. Pay-when-paid states that payments will be made to a subcontractor after the owner has paid the general. There’s usually a deadline for when payment will be made, such as seven days after payment from the owner. These deadlines are subject to federal and state prompt payment laws, so make sure...
Termination for convenience
These clauses stipulate what happens if the owner terminates the project for their own purposes. Often the clause states that contractors will only be paid for work that has been performed or installedafter the date of termination. This means that materials or equipment that have been purchased and haven’t been installed yet aren’t paid for, and the contractor incurs the cost without reimbursement. This clause should be changed to include reimbursement for materials and equipment that have be...
No damage for delay
A no damage for delay clausestates that a contractor cannot be reimbursed for costs incurred by a delay caused by an upper-tier party. For example, a subcontractor cannot claim costs for a delay caused by the owner or the GC. This means that lower-tier contractors can lose significant amounts of money waiting for upper-tier contractors to move the work along, whether they caused the delay or not. This clause should be changed to include reimbursementfor damages if a delay is caused by an upst...
Flow-down clauses
Many subcontractor contracts have a clause that states that the terms of the prime contract apply to the contract with the subcontractor. These are called flow-down clauses. If you find such a clause in your contract, make sure you request a copy of the prime contract so you can review it. Since you are agreeing to the terms of the prime contract, you have a right to review those terms. If you have a question about something in the prime contract, ask the general contractor before proceeding.
Change orders
Be sure to review the section that deals with change orders. You’ll want to know what the process for submitting changes is, what the notice deadlines are, and the process for filing a claim if a change is not accepted. If the notice deadlines are too short, negotiate to extend them so you have time to put together the required backup information.
Warranties
Most construction contracts require contractors to warranty their material and labor for at least one year. Review the warranty clauses to make sure there aren’t hidden warranty requirementsthat the owner or general contractor is requesting. Sometimes they may request warranties of five or 10 years, depending on the work being provided. Make sure you know how long you have to warranty your work before you start the project.
The bottom line is you need to read each contract you receive carefully. If you can, have an attorney review each contract before signing it. They will suggest changes and let you know of any red flags that you need to be aware of. Always use your best judgment, and don’t be afraid to suggest changes that better protect your company.
- Failure to Preserve Lien Rights. Lien claimants must take the proper steps to preserve their lien rights. In Ohio, construction projects formally start when the owner records a Notice of Commencement,[1] which is a document that compiles all necessary information in one convenient document for subcontractors and materialmen to rely upon to assert their lien rights.
- Failure to Timely File an Affidavit for Mechanic’s Lien. Timing is crucial for protecting lien rights. A lien claimant must be aware of two crucial factors to perfect a mechanic’s lien claim: (1) the deadline for filing an Affidavit for Mechanic’s Lien; and (2) calculating when the clock begins to run for the filing of an Affidavit for Mechanic’s Lien.
- Failure to Provide All Necessary Information. The Affidavit for Mechanic’s Lien must include the following information: (a) the amount owed; (b) a description of the property subject to the lien; (c) the name and address of the person for whom the work was performed or the material provided; (d) the name and address of the owner; (e) the name and address of the lien claimant; and (f) the first and last dates that work was performed or supplies were furnished.
- Failure to Provide Proper Notice. Lien claimants have the duty to serve the recorded lien. The Affidavit must also be served on the owner of the property within 30 days after filing with the local county recorder’s office.
Jan 19, 2024 · This bipartisan bill has received widespread support from Ohio’s business community and is a top priority for Secretary LaRose. SB 98 will help small business owners by outlawing identity theft of corporate filings, empowering individuals to report bad actors, and by combatting deceptive “scam” business mailings that imitate official ...
Feb 18, 2022 · Ohio Secretary of State Frank LaRose announced more options are now in place for limited liability companies (LLCs) to manage and structure themselves in ways that will provide the certainty and confidence they require to be successful.
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Ohio Consumer Law Overview. The cornerstone of Ohio consumer law is the Consumer Sales Practices Act (CSPA), which protects individual consumers from unfair, deceptive and unconscionable sales practices in connection with consumer transactions.
