Virginia Supreme Court – Construction Law Musings- Richmond, VA

Fraud, the VCPA and Construction Contracts

Originally posted 2014-11-10 09:36:15.

I’ve discussed the economic loss rule here at Musings on several occasions. The economic loss rule basically states that where one party assumes a duty based in contract or agreement, the Virginia courts will not allow a claim for breach of that duty to go forward as anything but a contract claim. This doctrine makes fraud claims nearly, though not absolutely, impossible to maintain in a construction context. In a majority of instances, fraud and construction contracts are very much like oil and water, leaving parties to fight it out over the terms of a particular contract despite actions by one party or the other that non-lawyers would clearly see as fraud.

However, a recent case decided by the Virginia Supreme Court gives at least some hope to those who are seemingly fooled into entering a contract that they would not other wise have entered into. In Philip Abi-Najm, et. al, v Concord Condominium, LLC, several condominium purchasers sued Concord under for breach of contract, breach of the Virginia Consumer Protection Act (VCPA) and for fraud in the inducement based upon flooring that Concord installed that was far from the quality stated in the purchase contract. Based upon these facts, the Court looked at two questions: 1. Did a statement in the contract between Concord and the condo buyers create a situation in which the merger doctrine barred the breach of contract claim, and 2. Did the economic loss rule bar the VCPA and fraud claims?

After analyzing the merger claim and determining that the merger doctrine did not bar the breach of contract claim, the Court moved on to its analysis of the VCPA and fraud in the inducement claims. In both instances, the Court determined that the causes of action would stand. It reasoned that the VCPA created an independent statutory requirement making it unlawful to misrepresent that goods are of a particular quality. Because this duty arose independent of the contract, the claim was not barred by the economic loss rule.

Similarly, the fraud in the inducement claim was not barred because the plaintiffs alleged that Concord deliberately misrepresented the quality of the flooring knowing that it would likely cost Concord the sales if it disclosed the actual quality of the floors. In short, the fraud, as alleged, was independent of the contract because it was conceived to bring buyers in despite Concord’s having no intention to follow through on the quality of the floors.

The lesson here is that pleading matters and that not all is lost for a consumer or home buyer that thinks that he or she is subject to fraud. However, the devil is in the details and in the details put into the pleadings. Without pleading some independent duty outside of the contract, any fraud or other non-contract claim will fail. The advice of an experienced Virginia construction attorney will help you parse through the facts and properly package them for presentation to the Court.

As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.

Are Sprinklers “Equipment”? Yes They Are.

Originally posted 2011-01-24 09:00:44.

In the last month the Virginia Supreme Court decided two cases that should be of interest to contractors, subcontractors and material suppliers in the world of Virginia construction. In this week’s Construction Law Musings, I will discuss the first, and you can tune in next week to find out my take on the second. The case that I will be discussing in this post is Royal Indemnity Co. v. Tyco Fire Products LP. In the Tyco case the Court considered an all important question under the Virginia Statute of Repose; namely: What is the difference between “equipment” and “ordinary building materials?”

Tyco involved a fire at an apartment complex that was linked to defects in the sprinkler system. After paying a claim, Royal sought indemnification from Tyco, the manufacturer of the sprinklers, and SimplexGrinnell, the installer of the system. In response to the suit, both parties filed pleas in bar asking the court to dismiss the negligence based claims pursuant to the statute of repose. The Circuit Court agreed with the defendants and dismissed the claims while ruling that the sprinklers were ordinary building materials and therefore the product liability claims relating to those sprinklers were barred.

Interestingly, the Virginia Supreme Court reversed the Circuit Court ruling as to Tyco. In doing so, it determined due to the technical nature of the sprinklers and the fact that the sprinklers were self contained pre-manufactured units (among other factors), the sprinklers installed at the building were equipment (not subject to the statute of repose) and not ordinary building materials (subject to the statute of repose). The Court then went on to state that, because Simplex merely installed the sprinkler equipment, it was in fact able to take advantage of the statute of repose and therefore was properly dismissed from the case by the Circuit Court.

The takeaway? Firstly, in case you didn’t think sprinklers were equipment now you have a court ruling to the contrary. More importantly, the Court added one more layer to the statute of repose analysis and gave guidance as to the differences between ordinary building materials and equipment. As you can see, this last distinction can mean the difference between a successful and relatively inexpensive defense of a claim and drawn out litigation should you be faced with a negligent design claim as a contractor or construction material supplier. The assistance of an experienced construction attorney can help you wind your way through the various facts and circumstances that allow the distinction to be made.

Image via stock.xchng.

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Congratulations, You got Paid! Or Did You?

Originally posted 2010-01-22 09:00:24.

Contractors are feeling the pinch in today’s financial climate. Payments are being made slowly if at all. Clients unreasonably expect perfection despite the numerous moving parts on a commercial construction project (not to mention the mantra that “Murphy was an optimist”).

In such a climate, getting a check that won’t bounce is a key to staying in business. However, like with everything else in business, be careful before you cash the check.

A case in point is Helton v. Philip A. Glick Plumbing Company, a case just recently decided by the Virginia Supreme Court. In Helton, the homeowner underpaid for the work performed by a plumber and wrote “payment in full” on the memo line of the check and sent the check to the plumber with a letter making it clear that the payment was all the plumber was going to get. Needless to say, the plumber crossed out the “payment in full” language and cashed the check, then sued the homeowner for the balance.

The Virginia Supreme Court held that crossing out this language was not enough to overcome the doctrine of accord and satisfaction that is still alive and well in the Commonwealth of Virginia. The plumber was only entitled to the amount paid by the owner.

The lesson here is that many times construction pros are put in a tough position. Cash the check and risk the remainder of your hard earned money? Don’t cash it and risk not making payroll? In short, be careful and consult with someone knowledgeable in these grey areas of payment law before accepting less than you believe your work is worth.

As always, I welcome your comments below and encourage you to subscribe to keep up with the latest Construction Law Musings.

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Construction Delay Damages Can Be Tough to Show

Originally posted 2012-06-11 09:58:43.

The Supreme Court of Virginia Building Richmond, Virginia (Photo credit: Wikipedia)

Recently, there have been a few cases in construction that have grabbed the headlines (or at least those at this and some other blogs). The biggest stir seems to be from the Jacobs Engineering case discussed so ably by Matt Bouchard in last Friday’s Guest Post. However, while the “headlines” were grabbed by the U. S. Supreme Court’s decision not to review that case, the Virginia Court of Appeals handed down an instructive case regarding delay damages and actual costs.

In Commonwealth v. AMEC Civil LLC, the Court considered the above questions. The basic facts of the case involve a VDOT project that was delayed causing financial hardship to AMEC. Without going into the procedural history of the case (it is well laid out in the opinion and in the Virginia Lawyer’s Weekly summary of it), the case went to the Virginia Supreme Court and back and was appealed again after remand to the trial court.

Continue reading Construction Delay Damages Can Be Tough to Show

The Picky Nature of Mechanic’s Liens (or Why you need to count back from 150 before filing)

Originally posted 2009-03-30 09:00:00.

On numerous occasions here at Musings, I have discussed the almost ridiculously picky nature of mechanic’s liens in the Commonwealth of Virginia. The so called “150 day rule” found in Virginia Code Section 43-4 is no exception. The 150-day rule means that a contractor or material man can only include in a mechanic’s lien money due for labor or materials provided within 150 days of the date of filing of the lien or the last day that labor or materials are provided whichever is earlier.

A recent Virginia Supreme Court case considered this rule and found the inclusion of money for materials provided outside of this 150-day window to be a fatal defect in the lien memorandum rendering the mechanic’s lien unenforceable.

In Smith Mountain Building Supply, LLC v. Windstar Properties, LLC, Record Numbers 80651 and 80652, Smith Mountain filed two separate memoranda of lien that included money owed by Windstar Properties for materials admittedly supplied to the project but provided outside of this 150-day window. The Court, reconciling two prior decisions and despite an argument by Smith Mountain that inclusion of these sums was an “inaccuracy” covered by Virginia Code Section 43-15, determined (as is uniformly the case) that the 150-day rule is to be strictly enforced and therefore both liens were invalid and unenforceable.

In short, make sure that you get paid for your early labor and materials first and account for these payments by clearing out the early invoices to keep all of your accounts receivable on a project within the 150 days. Also, on a long project during which you may have labor or materials that fall outside of this window, multiple liens are both allowed and necessary to protect your rights.

As always, experienced legal counsel is helpful in this often confusing area.

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