Andrew Kwiatkowski, Mark Amzen, Brian Schultz, Lauren Johnson and Stephen Cordle | Dinsmore & Shohl
Contracts
Construction contracts
What standard contract forms are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution?
The construction industry in Ohio, like much of the United States, frequently uses standardized contract forms developed by recognized professional organizations. Some of the most used forms include:
American Institute of Architects (AIA) Contracts: Widely used in Ohio for building construction projects. Common AIA contract documents include:
- A101 – Standard Form of Agreement Between Owner and Contractor (Stipulated Sum)
- A201 – General Conditions of the Contract for Construction
- B101 – Standard Form of Agreement Between Owner and Architect
ConsensusDocs: Another set of standard contract forms developed by a coalition of construction industry groups. These contracts are often used as an alternative to AIA forms and include:
- ConsensusDocs 200 – Standard Agreement and General Conditions Between Owner and Contractor (Lump Sum)
- ConsensusDocs 240 – Standard Agreement Between Owner and Architect/Engineer
Design-Build Institute of America (DBIA) Contracts: These contracts are used for design-build projects where design and construction services are combined.
- DBIA Document No. 525 – Standard Form of Agreement Between Owner and Design-Builder
Contract language requirements
Ohio law does not explicitly require construction contracts to be in English or any other specific language. Since English is the primary language used in legal proceedings, commerce, and government operations in Ohio, however, contracts are almost always drafted in English. While there is no statutory requirement dictating the language, using English is advisable for enforceability in court and for regulatory compliance. If the parties to a contract prefer to use another language, it is common practice to include an English translation and specify that the English version will govern in the event of discrepancies.
Restrictions on choice of law and venue for dispute resolution
- Choice of law: Ohio generally respects the principle of freedom of contract, allowing parties to specify the governing law for their contract. This choice must have a reasonable relationship to the parties or the transaction. According to Ohio Revised Code section 1301.301(A), parties may choose the law of a jurisdiction that bears a reasonable relation to the contract. However, in the construction context, for a construction project in Ohio, section 4113.62(D) voids any provision that makes the construction contract subject to the laws of another state.
- Venue for dispute resolution: Ohio law does not prohibit parties from selecting a venue outside the state. However, Ohio Revised Code section 4113.62(D) imposes specific restrictions on construction contracts for projects located in Ohio. This statute invalidates any provision in a construction contract that requires disputes to be resolved in a state other than Ohio. Therefore, if a construction project is in Ohio, the contract must allow for dispute resolution within Ohio courts or through arbitration conducted in Ohio.
Payment methods
How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments?
In Ohio, the payment terms for contractors, subcontractors, vendors, and workers in construction projects are typically governed by the contracts between the parties, industry standards, and relevant state laws. Payment practices, including the frequency and method of payment, vary depending on the role of each party, the nature of the project, and contractual agreements.
Contractors and subcontractors
- According to Ohio’s Prompt Payment Act section 4113.61, contractors are required to make payments to their subcontractors promptly after receiving payment from the owner. Specifically, contractors must pay their subcontractors within 10 calendar days of receiving payment. Similarly, subcontractors must pay their sub-subcontractors and suppliers within 10 days of receiving payment.
Vendors and suppliers
Section 4113.61 outlines the payment terms for material suppliers in construction projects. It states that if a material supplier submits an invoice to a contractor in time for the contractor to include it in their pay request to the owner, the contractor must pay the supplier within 10 days of receiving payment from the owner. If the contractor fails to pay within this period, they must pay the supplier the amount due plus interest at 18% per annum, starting from the 11th day after receiving payment from the owner until the full payment is made.
Workers
According to Ohio Revised Code section 4113.15, employers are required to pay wages at least twice a month, unless otherwise agreed upon in writing by the employee. The statute covers all employees, including those working on construction sites, whether they are hired directly by the contractor or through a subcontractor.PPP and PFI
Is there a formal statutory and regulatory framework for PPP and PFI contracts?
There is a formal statutory and regulatory framework that governs Public-Private Partnerships (PPP) in Ohio, but there is no specific framework for Private Finance Initiative (PFI) contracts as understood in the UK. However, Ohio’s framework for PPPs incorporates elements often found in PFI models, particularly in infrastructure projects.
Public-Private Partnership (PPP) framework
Ohio has established a statutory framework to facilitate the use of PPPs, primarily for infrastructure development. These partnerships allow private entities to collaborate with public agencies to finance, construct, operate, and maintain public infrastructure projects.
Key statutes for PPPs:
Ohio Revised Code sections 5501.70 to 5501.83: These sections of the Ohio Revised Code govern the establishment and regulation of PPPs for transportation infrastructure projects.
- Sections 5501.71 and 5501.72 provide the Ohio Department of Transportation (ODOT) the authority to enter into PPP agreements with private entities for designing, constructing, operating, maintaining, or financing transportation projects, including roads, bridges, tunnels, and other infrastructure.
- Section 5517.011 allows for the design-build model in which a private entity can assume multiple roles, such as designing and constructing the project, while ODOT retains oversight authority.
- Section 5501.73 permits PPP agreements to include provisions for private financing, including tolling or other revenue-generating mechanisms, allowing the private partner to recoup its investment through user fees or long-term leases.
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