Virginia Federal Court upholds unilateral arbitration clause in construction contract. On a Project for the United States Air Force at Langley Air Force Base in Hampton, Virginia, an electrical Subcontractor filed a lawsuit for nonpayment under the Federal Miller Act. The clause provided that at Prime’s “sole election, any and all disputes . . . may be decided by mediation, arbitration or [ADR] proceedings as chosen by [Prime].”
The Court upheld the clause finding: (1) it was not vague simply because only one party (the Prime) could invoke its terms when the other party (Subcontractor) had already agreed to allow the Prime this right and (2) the contract as a whole was supported by sufficient consideration (i.e., benefit or detriment to each party).
This appears to be the first case by a Virginia court (state or federal) to interpret and uphold such a clause, which allowed only the Prime Contractor, not the Subcontractor, to resolve disputes by arbitration. North Carolina, West Virginia, and now Virginia agree on upholding unilateral arbitration clauses. Maryland disagrees.
When it’s time to butt heads, know how the local turf (court) will interpret the clause.
U.S. f/u/b/o Harbor Construction Co., Inc. v. T.H.R. Enterprises, Inc., 311 F.Supp.3d 797 (U.S. District Ct., Eastern District of Virginia, April 26, 2018)
Keep a Pass-Thru Claim Burning, Don’t Extinguish Liability
Prime contractors, have you ever submitted a subcontractor’s claim to a public owner? Subcontractors, have you ever wanted to submit a claim against the government, but you had no contract with government?
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
Barbecue and Construction Contracts
While barbecue recipes can be short and simple, contracts can be long and complicated. Fundamentally, though, recipes are very much like contracts: what’s required, how much of each part/ingredient, in what order should they be assembled/added, when, and for how long?
Show Your Work
A mentor of mine once said that process and procedures can be more important than substance and results. Like solving a math problem, how you solve it is often more important than the answer itself. The same is true in resolving construction contract disputes with public owners.
Substandard is Not Defective
The government need not follow the industry standard. It can do less or more.
Hide, Seek, & Seek
Have you ever played hide and seek? If you are the seeker, do you win the game when you find the hidden person? Yes, of course! Unless, you’re a government contractor.
Contractor Schooled School
Have you ever done exactly what you were supposed to do, but it didn’t work and you were blamed anyway? Nevertheless, if contractors follow the owner’s plans and it still doesn’t work, the contractor may be without fault – this is as it should be.
Walk It Off, Keep Going
During a recent soccer game, my seven-year-old son took the ball squarely in the face. But, he walked it off and continued playing. Contractors must do the same with changes.
Are We There Yet?
Next time you close a deal, get the essential terms on paper and signed by all parties before it’s Miller Time.
