AUTHOR’S PREFACE.........................................................................................
xi
ACKNOWLEDGEMENTS..................................................................
xiii
ABOUT THE AUTHOR..............................................................
xv
CHAPTER ONE:
FORMATION OF A CONTRACT IN THE PRIVATE SECTOR................................................ 1
1.1 Introduction................................ 1
1.2 Oral or Implied Contracts; Parol Evidence.... 1
1.2.1 Ambiguity and the Parol Evidence Rule............ 3
1.2.2 Custom and Usage of the Trade............ 3
1.2.3 “Written Changes Only” Clause............ 4
1.2.4 Partial Integration or Collateral Contract Doctrine............ 5
1.2.5 Latent Ambiguity............ 5
1.3 Quantum Meruit and Unjust Enrichment.................................... 6
1.4 Contracts Performed but Not Signed............................................ 7
1.5 Third Party Beneficiary Contracts............................................ 9
1.6 Contract Created by Acceptance of Purchase Order............................................ 11
1.7 Subcontractor Bids, Promissory Estoppel, and Related Means of Forming A Contract............................................ 12
1.8 Authority to Bind............................................ 14
1.9 TEAMING AGREEMENTS/AGREEMENTS TO AGREE............................................ 14
CHAPTER TWO:
FORMATION OF A CONTRACT IN THE PUBLIC SECTOR PUBLIC PROCUREMENT OF CONSTRUCTION CONTRACTS................................................ 19
2.1 Introduction................................ 19
2.2 Formation of Express Contracts with Public Bodies Generally.... 20
2.3 Implied Contracts with PUBLIC BODIES IN Virginia.................................... 22
2.4 Bidder/Offeror Eligibility............................................ 23
2.5 Competitive Sealed Bidding Is the General Requirement............................................ 24
2.5.1 Requirement to be Responsive and Responsible............ 26
2.5.2 Prequalification of Bidders or Proposers............ 28
2.6 Competitive Negotiation............................................ 30
2.7 Exceptions to the Requirement for Competitive Sealed Bidding............................................ 31
2.7.1 Professional Services............ 32
2.7.2 Procurement of Construction by Competitive Negotiation............ 32
2.7.3 Procurement of Design-Build or Construction Management by Competitive Negotiation............ 33
2.7.4 Highways, Excavation and Grading............ 35
2.7.5 Sole Source Procurement............ 36
2.7.6 Emergency Procurement............ 36
2.7.7 Small Purchase Procedures............ 37
2.7.8 Job Order Contracting............ 37
2.7.9 Joint and Cooperative Procurement............ 38
2.8 The Public-Private Education Facilities and Infrastructure Act of 2002 (PPEA)............................................ 39
2.9 Award of the Contract and Protest of Award............................................ 40
2.10 Local Procurement Guidelines............................................ 43
2.11 Enjoinment and Debarment............................................ 43
2.12 Withdrawal of Bids............................................ 45
2.13 Modification of the Contract Price............................................ 47
2.14 Contract Pricing Arrangements............................................ 47
2.15 Retainage............................................ 47
2.16 Bid Bonds, Performance Bonds, and Payment Bonds............................................ 48
2.16.1 Bid Bonds............ 48
2.16.2 Payment and Performance Bonds............ 48
2.17 Public Disclosure of Bidding and Contracting Records – Freedom of Information............................................ 49
2.18 Miscellaneous Required or Prohibited Provisions in Public Contracts for Construction............................................ 50
2.18.1 Prohibitions Against No-Damage-For-Delay Clauses............ 51
2.18.2 Prompt Payment............ 52
2.18.3 Encouragement of Particular Contractors; Anti- Discrimination............ 53
2.18.4 Immigration............ 54
2.18.5 Drug Free Workplace............ 54
2.18.6 Brand Names............ 54
2.18.7 Comment on Solicitation Documents............ 54
CHAPTER THREE:
INTERPRETATION OF COMMON CONTRACT TERMS UNDER VIRGINIA LAW................................................ 61
3.1 Introduction................................ 61
3.2 Requirement for Written Modification.... 61
3.3 The Contract Documents.................................... 61
3.3.1 Incorporation by Reference............ 62
3.3.2 Integration Clause............ 62
3.3.3 Precedence Clause............ 63
3.4 Scope of Work............................................ 63
3.5 Liquidated Damages............................................ 64
3.6 Termination for Convenience............................................ 65
3.7 “Pay When Paid” and “Pay If Paid” Clauses............................................ 65
3.7.1 Distinction Between “Pay-When” and “Pay-If............ 65
3.7.2 Prevention Doctrine............ 66
3.7.3 Burden of Proof............ 67
3.8 Lien Waivers............................................ 67
3.9 Indemnification............................................ 67
3.10 Notice Provisions............................................ 70
3.10.1 Generally............ 70
3.10.2 Notice of Claim Requirements under the Virginia Public Procurement Act............ 71
3.10.3 Notice Requirements under the Mechanic’s Lien Statute............ 72
3.10.4 Notice Requirements for Payment Bond Claims............ 72
3.10.5 Administrative Claims Procedures............ 72
3.11 No Damage For Delay Clauses............................................ 73
3.11.1 The Judicial Reaction............ 74
3.11.2 The Legislative Reaction............ 74
3.12 Limitation of Liability............................................ 75
3.12.1 In Contracts for Supply of Materials or Equipment............ 75
3.13 Differing Site Conditions............................................ 76
3.14 Approval of Shop Drawings............................................ 77
3.15 Arbitration............................................ 77
CHAPTER FOUR:
LIABILITY FOR CONSTRUCTION DEFECTS AND FAILURES................................................ 85
4.1 Introduction................................ 85
4.2 Against What Standard Is Defective Performance to Be Measured?.... 85
4.3 Compliance with Plans and Specifications – Spearin Doctrine.................................... 86
4.3.1 Spearin Doctrine Generally............ 86
4.3.2 Spearin Doctrine under Virginia Law............ 87
4.3.3 Contractor’s Duty to Review Changes............ 88
4.4 Responsibility When the Contractor Participates in the Design............................................ 88
4.5 Liability of the Design Professional for Design Defects............................................ 89
4.6 Design Professionals and the Economic Loss Rule............................................ 90
4.7 Design Professional Liability under a Third Party Beneficiary Theory........................................... 92
4.8 Design Professional as Owner’s Agent for Changes and Claims Resolution............................................ 92
4.9 Design Professionals and Statutes of Limitations............................................ 94
4.10 Remedies for Defective Work............................................ 95
4.10.1 Substantial Performance v. Contract Requirements ............ 95
4.11 Standards of Performance Arising From Implied Warranties............................................ 97
4.11.1 Builder Implied Warranties............ 97
4.11.2 Uniform Commercial Code............ 97
4.11.3 Builder Warranties in New Home Construction............ 98
4.12 Impact of Specific Contract Provisions on Standards of Performance............................................ 99
4.12.1 Strict Compliance............ 99
4.12.1 Express Warranties............ 99
CHAPTER FIVE:
DAMAGES, REMEDIES, AND DEFENSES................................................ 103
5.1 Introduction................................ 103
5.2 Cost Rule v. Value Rule, and the Concept of Economic Waste.... 103
5.3 Burden of Proof.................................... 105
5.3.1 Lost Profits............ 105
5.3.2 Impact of Sale of Building on Owner Damages............ 106
5.3.3 Damage to Structure During Construction............ 106
5.4 Mitigation of Damages............................................ 106
5.5 Direct Damages v. Consequential Damages............................................ 107
5.6 Contract v. Tort............................................ 108
5.7 Damages for Delay........................................... 109
5.7.1 Compensable Delay Damages, Direct and Home Office Overhead............ 109
5.7.2 Establishing the Time for Performance............ 111
5.7.3 Waiver of Delayed Completion............ 112
5.7.4 Effect of Allowing Late Completion............ 112
5.7.5 Issues of Delay between Prime Contractor and Subcontractor............ 113
5.7.6 No Damage for Delay Clauses............ 113
5.8 Acceleration Claims............................................ 114
5.9 Changes and Extra Work............................................ 115
5.9.1 Generally............ 115
5.9.2 Cardinal Change............ 116
5.10 Doctrine of First Breach............................................ 117
5.11 Impossibility of Performance............................................ 118
5.12 Set-Off............................................ 122
5.13 Waiver of Default............................................ 123
5.14 Subcontractor Pass-Through Claims............................................ 123
5.15 Statutes of Limitations............................................ 123
5.15.1 Introduction............ 123
5.15.2 Waiver............ 124
5.15.3 Applicable Limitations............ 124
5.15.4 Agreements to Modify the Statute of Limitations........... 125
5.15.5 Statute of Repose............ 125
CHAPTER SIX:
MECHANIC’S LIENS................................................ 131
6.1 Introduction................................ 131
6.2 Rule of Strict Statutory Construction.... 131
6.3 To What Type Work or Improvements Does the Lien Right Apply?.................................... 133
6.4 Importance of the Contract............................................ 133
6.5 Perfection v. Enforcement............................................ 134
6.6 Definition of the Parties............................................ 134
6.6.1 Owner............ 134
6.6.2 General Contractor............ 134
6.6.3 Subcontractor............ 135
6.6.4 Sub-Subcontractor or Lower Tier Subcontractor............ 135
6.6.5 Mechanic’s Lien Agent............ 135
6.7 Pre-Lien Filing Notice Requirements........................................... 135
6.7.1 Notice to Mechanic’s Lien Agent............ 136
6.7.2 Notice Required for Off-Site Improvements Benefitting Multiple Properties............ 138
6.7.3 Notice Pursuant to §43-11; A Subcontractor’s Right to Create Direct Liability of the Owner............ 140
6.8 Recording Deadlines for the Lien Memorandum............................................ 141
6.8.1 90 Day Requirement............ 142
6.8.2 The 150 Day Requirement............ 142
6.9 Place of Filing............................................ 144
6.10 Essential Elements of a Lien Memorandum............................................ 144
6.10.1 Name of Owner............ 144
6.10.2 Name of the Claimant............ 145
6.10.3 Amount of the Claim............ 145
6.10.4 What Was Done or Provided............ 145
6.10.5 When the Amount Claimed Is or Will Be Due and Payable............ 146
6.10.6 Statement Declaring Intent to Claim the Benefit of the Lien............ 146
6.10.7 Verified by the Oath of the Claimant or Its Agent......... 146
6.10.8 Brief Description of the Property on Which A Lien Is Claimed............ 147
6.10.9 Contractor’s License Recital............ 147
6.11 Required Notice at the Time the Lien Memorandum Is Recorded............................................ 147
6.11.1 General Contractor............ 148
6.11.2 Subcontractor and Sub-subcontractors............ 148
6.11.3 How Is Notice Given?............ 149
6.12 Joint or Blanket Liens – The Duty to Allocate............................................ 149
6.13 Enforcement of the Lien............................................ 150
6.13.1 Statute of Limitations............ 150
6.13.2 Necessary Parties............ 151
6.14 Bonding the Lien............................................ 152
6.15 “No Money Owed” or “Payment” Defense............................................ 153
6.16 “Cost to Complete” Defense............................................ 153
6.17 Lien Priorities............................................ 153
6.17.1 Among Mechanic’s Lien Claimants............ 154
6.17.2 Mechanic’s Liens v. Other Liens or Encumbrances .......... 154
6.18 Lien Waivers............................................ 155
6.19 Effect of Bankruptcy on Enforcement of Mechanic’s Liens ............................................ 156
6.19.1 The Automatic Stay of 11 U.S.C. §362 Does Not Prevent the Filing of a Memorandum of Mechanic’s Lien............ 157
6.19.2 The Effect of the Automatic Stay on Filing Suit to Enforce .......... 157
CHAPTER SEVEN:
PAYMENT AND PERFORMANCE BONDS................................................ 165
7.1 Introduction................................ 165
7.2 Fundamental Principle.... 166
7.3 Bond Requirements under the Virginia Public Procurement Act.................................... 166
7.3.1 Payment Bonds............ 166
7.3.2 Performance Bonds............ 167
7.3.3 Alternative Forms of Security............ 168
7.3.4 Protected Claimants under a Virginia Public Procurement Act Payment Bond............ 168
7.3.5 Claims Procedures Under a Virginia Public Procurement Act Payment Bond............ 168
7.4 Payment Bonds and the Effect of Payment up the Chain Or Pay-When-Paid Clauses................................. 170
7.5 Third-Party Beneficiary Claims on Payment Bonds............................................ 171
7.7 Payment Bonds and the Statute of Limitations........................................... 172
7.8 Performance Bonds............................................ 173
7.8.1 Payment Claims Under a Performance Bond............ 173
7.8.2 Discharge of Surety............ 174
7.8.3 Owner’s Remedies Under a Performance Bond............ 175
7.8.4 Owner’s Right to Assign Performance Bond Rights ........... 176
CHAPTER EIGHT:
BUILDING CODES................................................ 181
8.1 Introduction................................ 181
8.2 Exceptions to the Supremacy of the Building Code.... 182
8.3 Enforcement of Building Code.................................... 183
8.4 Inspections............................................ 183
8.5 Appeals of Local Board Decisions............................................ 184
CHAPTER NINE:
LICENSING AND REGULATION................................................ 187
9.1 Introduction................................ 187
9.2 Authority for Regulation.... 188
9.3 Classes, Classifications and Specialties of Licensed Contractors.................................... 188
9.4 Obtaining a Contractor’s License............................................ 190
9.5 Temporary Contractor’s Licenses - Reciprocity with Other States............................................ 192
9.6 Enforcement Tools.... 193
9.6.1 Building Permits............ 193
9.6.2 Impact on Mechanic’s Lien Rights............ 193
9.6.3 Impacts on Submitting Bids............ 194
9.6.4 Criminal Sanctions and Other Penalties........... 195
9.6.5 Impact on Right to Enforce Contract Remedies............ 195
9.6.6 Contractor’s Board Action............ 196
9.7 Exemptions from the Requirement to Have A Contractor’s License.................................... 196
9.8 Foreign Corporations Qualified to Do Business in Virginia............................................ 199
9.9 Architects and Engineers............................................ 200
9.9.1 Exemptions to Licensing Requirements............ 200
9.9.2 Regulations............ 202
9.9.3 Professional Corporations, Professional Limited Liability Companies, and other Entity Forms............ 203
9.9.4 Standards of Practice and Conduct........... 203
