I have discussed the Hensel Phelps case and the potential issues caused by both poorly drafted indemnity clauses and the lack of a statute of limitations applicable to the Commonwealth of Virginia and its agencies in 2017. New legislation (supported by various contractor groups including my friends at the AGC of Virginia) has been proposed for the 2019 General Assembly session that seeks to address at least part of this issue. While the indemnity provisions of your construction contracts can be addressed by careful drafting with the help of an experienced construction attorney, the proposed legislation (found in HB1667) seeks to address the statute of limitations issue.
The proposed legislation is described as follows:
Provides that no action may be brought by a public body on any construction contract, including construction management and design-build contracts, unless such action is brought within five years after substantial completion of the work on the project and that no action may be brought by a public body on a warranty or guarantee in such construction contract more than one year from the breach of that warranty, but in no event more than one year after the expiration of such warranty or guarantee. The bill also limits the time frame during which a public body, other than the Department of Transportation, may bring an action against a surety on a performance bond to within one year after substantial completion of the work on the project.
In short, it gives a contractor performing work for a Virginia agency the peace of mind that it will not have unlimited responsibility for its work by limiting its contractual liability period to five years and its warranty obligations to no longer than a year after the expiration of any warranty. The bill would further limit the liability of a surety under a performance bond, thus allowing sureties and their principals to move on to other projects without the corresponding hit to the principals overall bonding capacity after a period of time.
In my opinion this would be a good addition to the Virginia Public Procurement Act and allow better business for all involved.
I will keep an eye on the progress of this bill,among others that will be of interest to construction professionals in Virginia, once the General Assembly session begins.
What are your thoughts on this bill? Please share your thoughts below.
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