Builders and Contractors Exchange
Weekly Bulletin: 02 Dec 2005
Pass Through Of Subcontractor Claims In Virginia
By: James Harvey III
In many construction projects, the impact of a changed condition largely falls on the shoulders of a subcontractor. Most subcontract agreements provide that the general contractor is not liable to the subcontractor for a change unless the owner recognizes it as such. How then does the subcontractor recover from the owner for a changed condition? In Virginia, the answer is not so simple.
A general contractor cannot simply wash its hands of the claim, and let the subcontractor fight it out with the owner. In Virginia, a party cannot sue another for economic losses (such as the costs of performing extra work on a project), unless it is in a contractual relationship with that party. That means that the general contractor must be the party that pursues the extra work claim against the owner. However, if the general contractor does not have a responsibility to the subcontractor for a claim denied by the owner, then has it truly suffered any damages that it can claim against the owner? That issue remains unresolved in Virginia for most contracts.
After a few difficult cases in the 1990s, the law changed for the pass-through of subcontractor claims for VDOT contracts only. Now, for suits against VDOT, the absence of a contract between the subcontractor and VDOT is not a valid defense for VDOT as the “owner” of the project. This year, the Virginia Supreme Court interpreted this statute to mean that the general contractor does not even have to be the named party in the administrative process or lawsuit against VDOT. The absence of a similar statute for other construction projects will only continue to lend uncertainty to the path of recovery for subcontractor claims.
So, unless a claim involves a VDOT contract, the subcontractor must pursue extra work claims against the general contractor, who must be the named party asserting a claim against the owner for its subcontractor’s extra work.
Questions?
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.