OHIO. I am asked all the time, “If they don’t pay me, can I walk off the job?” My answer is always a very firm “maybe, but it’s a risk.” The risk is whether the Court thinks that the failure to pay you was a material breach of the contract. The Hamilton County (Cincinnati, Ohio) Court of Appeals decided a case this week, H&H Glass v. Empire Building Co. that held that “not all breaches are equal. A failure to perform a promise that is nominal, trifling, technical, or slight does not excuse performance under the contract by the non-breaching party…a breach of a portion of the terms of a contract does not discharge the obligations of the parties to the contract, unless performance of those terms is essential to the purpose of the agreement.” Whether non-payment is a material breach is a “question of fact” for the Judge, not you. So the risk is that the Judge will not agree with you.
So when you consider walking off a project for non-payment you need to remember that while you may think that non-payment is a “material breach,” the Judge may not. Here, the Judge ruled that the subcontractor could walk off the job and the Court of Appeals affirmed the Judge’s decision because since it was a question of fact to overturn it would require that the Judge’s decision was against the “manifest weight of the evidence,” an almost impossible standard to reach. Had the Judge not agreed, H&H could have been liable to Empire for damages.
H&H has walked off the job and sued Empire, the general contractor and its surety, Travelers, for the unpaid balance of the billed labor and materials, as well as payment for custom made items which were not readily resalable. Empire counterclaimed, suing for $25,000 in damages, claiming that Empire had breached the contract by walking off and forcing Empire to hire a replacement contractor.
The Court ruled in favor of H&H on its contract claim, against Empire on its counterclaim and against H&H on its claim for prompt pay damages, by somehow holding that while it was a material breach for Empire to withhold payment, that material breach was actually the result of a “good-faith dispute” and therefore the Ohio Prompt Pay Law did not apply. When the Prompt Pay Law does not apply, you lose the right to be paid 18% interest on the undisputed amount and to recover your attorneys’ fees.
Before you EVER consider walking off a job for ANY reason, understand that it is very risky. Talk with your construction law attorney…FIRST.
Russell O’Rourke is a Partner and the Chair of the Construction Law Department in the Cleveland, Ohio law firm of Meyers, Roman, Friedberg & Lewis, LPA. He may be reached at RORourke@MeyersRoman.com or 216-831-0042.