Previously in this on-again-off-again series of posts on construction contract basics, I discussed attorney fees provisions and indemnification. In this installment, the topic at hand is venue and choice of law.
As construction professionals (outside of us construction attorneys), you are likely to be focused on things like the scope of work in a construction contract, the price terms, payment, delays, change orders, and the like. However, the venue (where any lawsuit or arbitration will have to happen) and the choice of law (what state’s law applies) can be equally important. You need to know where you will have to enforce your rights under the contract and also what law will apply. Will you need to go to another state to enforce your rights? Even if not, will your local attorney have to learn the law of another jurisdiction? These are important questions when reading and negotiating your prime contract (if with the owner) or subcontract (if with the general contractor).
Here are some general thoughts regarding these provisions:
- Clauses setting a particular venue for a lawsuit (for instance the Circuit Court of Henrico County, Virginia) are enforceable. This is Virginia and this is a contract. However, there is a minor caveat that, in most instances, a Virginia contractor working on a Virginia-located project cannot be forced to go out of state to pursue its rights. Any venue provision to that effect is unenforceable. But. . .
- Choice of law provisions are also enforceable. The parties to a contract can set a particular state’s (or country’s) law to be used when interpreting the rights of the parties. Often that choice of law is where the “upstream” party, and likely their attorney, are located. This puts a bit of an interesting spin on (1) above. The question then becomes what happens where the law of, say, Illinois applies and the venue for legal action is set as Illinois. Does the Virginia law stated above still apply if a suit is filed in Illinois? I hope that you won’t have to find out because. . .
- You should always try and keep the choice of law and venue to the location of the project. For you Virginia contractors this is most likely to be Virginia. This solves the conundrum above because it aligns the choice of law and venue in Virginia.
- Finally, your local Virginia construction attorney will much appreciate not having to travel out of state or learn law from another state with which he is unfamiliar (with the corresponding fees to you as the client).
As you can see from the above (albeit limited) discussion of venue and choice of law, without a good grasp and awareness of the effects of these provisions, you could end up on a plane to another state to enforce your rights on a local construction project.
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