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Properly Pleading Compliance with Conditions Precedent: TC MidAtlantic Development, Inc. v. Commonwealth of Virginia

In the recent case of TC MidAtlantic Development, Inc. v. Commonwealth of Virginia, Record No. 091271, the Virginia Supreme Court was faced with the issue of properly pleading compliance with conditions precedent in a public contract. Despite the tongue-twisting nature of this issue, the crux of the case came down to simple timing.

In May 2004, TC MidAtlantic and the Virginia Department of General Services (“DGS”) entered into a contract to perform work on the Washington and Finance Buildings in Richmond, Virginia. Irreconcilable differences arose between TC MidAtlantic and DGS, with DGS ultimately sending TC MidAtlantic a letter dated February 16, 2007 terminating the contract. That letter also informed TC MidAtlantic that it was entitled to file any claims pursuant to Section 47 of the contract. Section 47 stated:

Contractual claims…shall be submitted, in writing, no later than sixty (60) days after final payment; however, written notice of the Contractor’s intent to file such claim must be given at the time of the occurrence or beginning of the Work upon which the claim is based. The filing of a timely notice is a prerequisite to recovery under this Section…. All claims shall be submitted along with all practically available supporting evidence and documentation.

TC MidAtlantic filed a complaint in the Circuit Court for the City of Richmond on April 24, 2007. The trial court concluded that DGS’s February 16, 2007 letter initiated the sixty-day period for TC MidAtlantic to submit a written claim, and that its April 24, 2007 complaint came too late to comply with Section 47.

On appeal, TC MidAtlantic argued that it sufficiently pled compliance with Section 47, pointing to paragraphs in its complaint alleging that it made written demands on DGS for payment and performance. The Virginia Supreme Court pointed out that the complaint never specifically alleged that TC MidAtlantic submitted a claim within the 60-day window or in a timely fashion, as required by Section 47. TC MidAtlantic also tried to escape the 60-day requirement by unsuccessfully characterizing the February 16, 2007 letter as a “final written decision” on its claim, arguing that it then had six months from February 16, 2007 to file suit. The Court likewise rejected that argument, and went out of its way in a footnote to say that TC MidAtlantic did not appeal the trial court's conclusion that the letter initated the claim procedure.

Most frustrating of all, TC MidAtlantic had filed a motion to reconsider with the trial court, attaching March 23, 2007 letters and supporting schedules showing amounts owed under its claim. But the Virginia Supreme Court concluded that TC MidAtlantic forgot to ask leave to amend its complaint to allege that the March 23, 2007 letters complied with the condition precedent of Section 47’s notice requirement. The Court instead held TC MidAtlantic to the original wording of its complaint, including the argument that the February 16, 2007 letter was a “final written decision” rather than the initiation of Section 47’s claim procedure.

The lessons to take from this case are:

  1. If you are confronted with a party who insists on including a contractual provision that will shorten the time frame in which you must give notice of a claim or file suit, be realistic about the deadlines you agree to, and stick to them.
  2. The second a dispute arises, get the contract out and read it carefully to ensure that you comply with all notice and claim provisions.
  3. And if your case involves a condition precedent with notice or claim provisions, don’t forget to acknowledge the condition precedent in your pleadings, assert that you complied, and attach exhibits demonstrating exactly how you complied.