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This blog focuses on real estate, land use and construction-related topics affecting Virginia and the Washington, D.C. metro area. With topics ranging from contract drafting and negotiation to local and regional land use project updates, the attorneys at Bean, Kinney & Korman provide timely insight and commentary on the issues affecting owners, builders, developers, contractors, subcontractors and other players in the industry. If you are interested in having us cover a specific topic, please let us know.

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Posts tagged Contracts.

Ask anyone who has several years of experience in construction if they ever engaged in a handshake deal and the answer will be a resounding “yes.” For those unfamiliar with the term, a handshake deal is essentially a verbal commitment that is sealed with a handshake between the contracting parties. Handshake deals were not just limited to transactions between a contractor and an individual. It was, and sometimes still is, common for businesses to engage in sophisticated deals with a simple handshake between business owners. The moment the parties shook hands, reputations were at stake and promises were meant to be kept. While the handshake did not obviate the need for documentation, the value of the handshake was understood to be the cornerstone of what the parties intended to occur for a construction project.

December 16, 2013
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Topics Contracts

Most contract negotiations boil down to several key terms.  For construction contractors, these are five critical items that you need to carefully consider and negotiate in each of your agreements.

I.  What is the Scope?

The starting place of a construction contract is the work to be performed.  Remarkably, this is often poorly or inconsistently defined.  Contractors should strive for a clear definition of what are the “contract documents” and what portion of the work is the responsibility of that contractor.

Stretch ArmstrongThose wishing to stretch indemnity clauses to the limit may want to read the recent Supreme Court of Virginia case, Uniwest Construction v. Amtech Elevator Services.  This case, in addition to a recent indemnification case from the 4th Circuit, demonstrate that there are some real risks to demanding excessive indemnity obligations in a contract.  You may actually wind up with nothing if you go too far.

Here is a new sampling of cases in which the Virginia Supreme Court has recently granted appeals.

In April, the Court granted the petition for appeal in Studio Center Corporation v. WKW Construction, LLC, Record No. 092257, challenging the ruling of Judge Shockley from the Circuit Court of the City of Virginia Beach. Studio Center is contesting Judge Shockley’s holding that Virginia Code Section 54.1-1115(C) applied when the unlicensed contractor admitted it knew Virginia law required a license, but did not realize that it could not use someone else’s license. This case should give us some much needed guidance on Section 54.1-1115(C)’s requirement of “good faith” and “actual knowledge.”

shredded paper binsTypically, Virginia courts will simply review and apply the terms of contracts.  This is great if you have a good contract, horrible if the contract tilts towards your opponent.  In contrast to the general rule, Virginia courts are quite hostile to non-compete agreements and are more than willing to throw them completely out when the clauses go overly broad.

Another recent example was highlighted yesterday in The VLW Blog.  The case, Specialty Marketing v. Brunson, involved Specialty, a wholesale distributor of electronics.  Brunson was a sales representative.  When he became a director and purchased stock in the company, Brunson signed a non-compete.  Brunson left Specialty's employment and was hired six months later to act as an account representative for a competitor in his old territory. 

Virginia General AssemblyThe Virginia General Assembly passed a statute, HB 797, that expressly permits architects and engineers to enter into contractual limitation of liability clauses.  The ACEC, VSPE, and VSAIA actively pushed to change the statute in the wake of several cases which ruled that previous language in the corporate enabling statute barred limitation of liability clauses for design professionals.  As can be sen from the bill tracking, the measure passed fairly easily in both the House and the Senate.

NewspaperThere are a number of important construction law and economic developments that I want to pass along to our readers.  Given timing and the plethora of topics to address, I wanted to share these developments in a more rapid fire format so these updates remained timely.

Washington Snowstorm Lincoln MemorialSo, here in the Washington, DC area we are buried under a couple feet of snow.  You know we have a lot of snow when the Lincoln Memorial steps have been transformed into a good tobogan run.  Unfortunately, so much snow means a ton of dead load placed on roof structures.  There are a number of roof collapses reported around the area.  So far, the major blessing is it appears that none of these events have led to any serious personal injuries.  You can definitely expect that these significant collapse events will trigger equally significant property damage claims, business interruption issues, and perhaps threaten the long-term viability of some businesses.  These events include:

Here is a news report on the Baileys Crossroads roof collapse from WJLA:

[embed]http://cfc.wjla.com/mediaplayer.swf[/embed]

With the threat of more snow potentially on the way, the region may not have seen the last of these problems.  Building owners may face some significant hurdles to full recovery, including finding out the limitations of their insurance policies, facing problems with statutes of limitations and/or statutes of repose, and finding that responsible parties are casualties of the current economic crisis and thus are judgment proof.  All of these factors point to a few very important lessons:

  • Know and understand your insurance coverage and its limitations before you have problems
  • When shopping for insurance, evaluate risk and consider not just shopping for the lowest price; you may find that going cheap on insurance ultimately costs you far more
  • Know and understand applicable statutes of limitations and statutes of repose prior to entering into design, construction, or property purchase agreements
  • Factor in the impacts of these time limitation issues when you asses the appropriate levels and types of insurance your purchase
  • Do your homework - conducting detailed inspections prior to purchase and properly evaluating the strength and credentials of your consultants and contractors is an investment of time and money, but it is worth it in the long run rather than face a catastrophic loss in the future

Image by vpickering

The Art of WarA post yesterday from our friend Chris Hill at Construction Law Musings really resonated with me on a critical skill that many lawyers seem to lack.  The post, "What Owners Look for in Green Building and Why Contractors Should Care" advocated that contractors should know and understand what project owners were looking for in green buildings.  As Chris states well, "Knowing the other side's playbook is one way that a football team can prepare, the same holds true in pre-construction negotiation of contracts."

will and trustThe Supreme Court of Virginia issued an opinion last Friday in the case of Virginia Home for Boys and Girls v. Phillips  that reads like a law school examination question.  The court ruled that a man had no claim against an estate because he had no written contract and no independent verification.  

The basic principles are easy.  The statute of frauds in Virginia generally provides that all contracts for the sale of real estate must be in writing.  The so-called "Dead Man's Statute" provides that in cases where the opponent is incapable of testifying, no judgment shall be rendered if it is founded solely on uncorroborated testimony.  Both of these statutes make it incredibly difficult for a party to make a claim against an estate based on oral contracts, particularly claims involving real estate.