Don’t Leave Retainage on the Table

Here at Musings, the contract is king and most of the time, the Virginia state and federal courts will not imply a right of action from a statute that does not specifically create one.  Furthermore, as a general rule, contracts are strictly enforced and their terms upheld absent a statute that states otherwise.

One such statute is the Virginia Public Procurement Act (“VPPA”) a statute that has it’s terms implied into public construction contracting documents by operation of law.

The Western District of Virginia federal court restated this fact in a recent opinion, South End Constructors Inc. v. Tom Brunton Masonry Inc.  In this case, a masonry contractor sued South End Constructors, Inc. for, among other things, withholding more retainage (10%) under its contract with its subcontractor than the VPPA allows (5%).  South End moved to dismiss this count of the Complaint stating that the VPPA does not create a private right of action.  The federal district court agreed and dismissed the offending count.

Of course, this case would not be particularly interesting had the Court merely stopped there.

Needless to say, the Court didn’t stop there, it went on to state that the retainage provisions of the VPPA not only were implied into the contract, but supplanted the express language of the contract between the parties.  The Court reasoned:

The lack of an implied right of action does not leave Brunton Masonry without a remedy, however, because the 5 percent retainage limit was incorporated as a matter of law into the contract. Moreover, a contract to perform an act prohibited by a statute is void. The court concludes § 2.2-4333 was incorporated by operation of law into the contract between South End and Brunton Masonry. This statutory prohibition replaced the relevant, void section of the contract that purported to allow South End to retain 10 percent of the progress payments. Further, Brunton Masonry did not waive the protections of § 2.2-4300 when it agreed to the 10 percent retainage in the contract.

In doing so, it cited several Virginia Supreme Court opinions that state that the parties cannot contract away a statutory protection as easily as one might think in a state where contracts are so strictly interpreted.  It is these exceptions to the general rule that keep construction attorneys like me in business.

As always, read the full opinion yourself and draw your own conclusions.  Were you at all surprised by the result?

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