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Competing lawsuits raise contract interpretation questions

Contracts with the state of Ohio will often involve two layers: the prime contract with the company responsible for project completion, and one or more subcontracts between that company and other companies it uses to help do the work. A recent dispute between two companies engaged in a project to raze some old buildings has called into question how each of them perceived its role in the prime-and-subcontractor relationship.

The project involved work to be done for the Ohio Department of Transportation and the city of Cincinnati. At least part of the project took the form of a minority-owned business set-aside contract under the Department of Transportation's "EDGE" (Encouraging Diversity, Growth and Equity) program. One of the two companies involved in the dispute is evidently a minority-owned business.

The problem began when one of the two companies -- the non-minority-owned one -- sued the other, claiming that it was owed $275,000 in contract payments for work it had done because the other minority-owned company did not have the personnel to do the work itself. Matters became complicated, however, when the defendant company filed a counter-suit claiming that it was the subcontractor, and that the original plaintiff had misappropriated EDGE funds intended for payment to the minority-owned business.

How each of these two businesses can disagree on a question as basic as who is the prime contractor and who is the subcontractor is remarkable, and highlights the need for careful drafting of business contracts.

An experienced business and commercial law firm can be instrumental in avoiding misunderstandings over fundamental contract terms, which in turn can help to reduce the risk of disagreements turning into costly litigation.

Source: Cinicnnati.com, "Suit accuses raided Newtown landscaper of fraud," James Pilcher, July 8, 2015

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