Anyone who reads Construction Law Musings with any regularity (thank you by the way) knows that the contract is king in most instances here in Virginia. Any commercial construction subcontractor in Virginia is likely also very familiar with so-called “no damages for delay” clauses in construction contracts. These clauses essentially state that a subcontractor’s only remedy for a delay caused by any factor beyond its control (including the fault of the general contractor), after proper notice to the general contractor, is an extension of time to complete the work. However, in 2015 the Virginia General Assembly passed a change in the law that precluded the diminishment of any right to claims for demonstrated additional costs prior to payment. This left open the question as to which types of “diminishment” would be barred by the statute.
The recent case out of the Eastern District of Virginia federal court, Strata Solar LLC v. Fall Line Construction LLC, added a bit of clarity.
In Strata Solar, Fall Line Construction sought damages for, among other items, claims relating to changes in the work and for delay-related damages. Strata responded with a motion to dismiss these two categories of claims as a matter of law. After reviewing and denying the notice-related arguments against the change order claim, the Court analyzed Fall Line’s argument that Va. Code 11-4.1:1 barred the no damages for delay provision of the subcontract and rendered that clause void.
After review of the small amount of case law on the subject, the Court agreed with Fall Line that the Virginia statute rendered no damages for delay clauses that had previously been enforceable in Virginia void. In doing so, the Court stated:
[t]he so-called “no damages for delay” clauses at issue substantively diminish subcontractors’ rights in violation of Virginia Code § 11-4.1:1. Importantly, the express language of § 11-4.1:1 renders void any contract provision “that waives or diminishes [a subcontractor’s] right to assert claims for demonstrated additional costs,” text that can only be read to encompass the clauses at issue here.
In short, the Court found that barring delay damages by contract diminishes a right to collect demonstrated additional costs in violation of the statute. While this is a trial court opinion and the case is still moving forward, the reasoning seems sound. This case will give Virginia construction professionals and their Virginia construction counsel an argument against such contractual clauses being enforced in the future. As always, I recommend that you read the opinion in full.
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