Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

Repudiation, Termination and Negotiation in Construction Cases (An Appellate Perspective)

Repudiation, Termination and Negotiation in Construction Cases (An Appellate Perspective)For this week’s Guest Post Friday here at Musings, we are happy to get appellate lawyer, Jay O’Keeffe‘s perspective on construction cases for a second time. Jay (@jayokeeffe) practices business and appellate litigation with Gentry Locke Rakes & Moore in Roanoke, VA. He can reached at 509-983-9459 or at his blog, De Novo.

I was flattered when Chris asked me to do a guest post at Musings, and I accepted immediately. That was foolish. As I remembered about 12 minutes after signing on, I did a guest post a while back that covered every single thing I know about construction law. It probably took almost 400 words.

So I panicked. But after fretting for a few days, I remembered an interesting contract case from June, Bennett v. Sage Payment Solutions, Inc., that discussed whether a defendant can raise repudiation as a defense to a breach of contract claim after the plaintiff has begun performance. Construction law often involves contracts. This seemed like a useful connection. Therefore, I will share what I have learned.

In Bennett, the eponymous executive was named president of Sage, at a salary of $360,000. Four months into his year-long contract, he advised the company by email that, if it did not increase his salary about $1,000,000, he would begin to look for work elsewhere. Sage did not meet his demand. Bennett stayed on as president, but openly pursued other employment. Sage told him that it considered his email to be a resignation. Bennett disagreed, contending that Sage’s denial of his payment demand had terminated his employment. He sued Sage seeking severance payments due under his employment agreement. On the third day of a jury trial, Sage moved to amend its pleadings to include a defense of repudiation. The court granted the motion and instructed the jury accordingly. The jury returned a verdict in favor of Sage, and Bennett appealed.

The primary issue on appeal was whether a party’s repudiation of future obligations under a contract after performance has begun can constitute a defense to a breach of contract claim. The Supreme Court of Virginia held that it could. Writing for the Court, Justice Millette acknowledged the line of cases that characterize repudiation before performance has begun as “anticipatory breach.” The Court nonetheless held that repudiation can also apply to a contract that has been partially performed, when future obligations are repudiated. If a contract requires continuous performance over a period of time, a party’s renunciation of his obligations can constitute repudiation; in those cases, the breach is anticipatory with respect to the performances not yet due. For a repudiation to constitute a breach, it must be clear, absolute, unequivocal, and cover the entire performance of the contract. Here, the Court held that the evidence could have supported a defense verdict.

Bennett also challenged the trial court’s decision to allow Sage to amend its pleadings to conform to the evidence. Of course, every litigant is entitled to be told in plain and explicit language his adversary’s ground of complaint. But that rule must be reasonably applied. Thus, Code Section 8.01-377 grants the trial court discretion to allow pleadings to be amended to conform to the evidence under certain circumstances. Here, Bennett was not prejudiced by the amendment, so the trial court did not abuse its discretion.

While the practicalities of the construction world are admittedly lost on me, it seems that Bennett might have useful applications in negotiations between contractors and subs under contracts that impose continuing performance obligations.

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Repudiation, Termination and Negotiation in Construction Cases (An Appellate Perspective)
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2 Responses to Repudiation, Termination and Negotiation in Construction Cases (An Appellate Perspective)

  1. […] short answer is that it’s hiding. Last week I did a guest post at Chris Hill’s blog, Construction Law Musings, about the SCV’s recent opinion in […]

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