We talk a lot on this blog about protecting yourself from unwanted legal situations by understanding your contract and knowing and understanding the laws that govern that contract and the project you are working on. These points are reiterated time and time again because they are vital to business in the construction world. I would like to reiterate that it is not just about knowing your contract and the law. It really comes down to understanding each, and this understanding should lead occur before your contract and project begins. Therefore, you can be readily prepared to make the right decisions going forward. Decision like litigating a claim or not can have a huge impact on your wallet. With more preparation the contractor in this recent case may have decided to take a different route.
Victor Virgin and the New Hampshire DOT
The facts of this case are simple. Victor Virgin Construction Corporation bid on and won a contract for a DOT project in New Hampshire back in 2008. The project was scheduled to conclude on August 28, 2008. The DOT, not satisfied with initial plans, requested several changes from Virgin’s subcontractors. Virgin had little-to-no input on these changes. The DOT communicated directly with these subcontractors. The requested changes altered the expectations of the project, causing a significant construction delay of almost a year. Substantial completion occurred in December 2008, with final completion following in August 2009.
The dispute between Virgin and the DOT arose because the DOT only paid Virgin the contract price with a minor adjustment. Virgin in turn filed a suit for breach of contract and negligent misrepresentation.
The Courts Teach Virgin
After a lengthy amount of litigation, Victor Virgin Const. Corp. v. NH DOT, 75 A.3d 1136 finally arrived in the New Hampshire Supreme Court. Virgin was fighting for an award of $1.5 million in damages originally awarded by a jury in the trial court. This award was based of expenses incurred completing the project and the current state of Virgin, which was financially poor.
A new trial then ruled that “no reasonable jury could have awarded more than $779,078.80, as any greater amount would have been speculative.” This nearly cut the original damage award in half, and the court refused to award this due to breach of contract.
Once this case reached the NH Supreme Court, the DOT argued for a reduced award of $475,000. This was due to the fact that the last trial court disregarded the breach of contract claim and only ruled on negligent misrepresentation. The argument was that a tort action, negligent misrepresentation included, is capped by RSA 541-B to the amount of $475,000 per claimant. The court agreed, reducing the award even further to the statutory cap.
What Virgin Should Have Learned
I hate to sound like a broken record, but it is SO important to understand the law and your contract. The law here was clear that tort claims have a statutory cap, but the real damage dealt to Virgin was the loss of its breach of contract claim. When learning how to draft a contract and advise a client about a contract, you are taught to cover every base possible. This overly proactive approach to contracts can be found in any industry. Amazon even has a zombie apocalypse clause written into its Terms of Use, which is essentially a contract with its users. That may be a bit extreme of an example, but I hope you are getting the point.
Every contract you enter into should clearly define when the business relationship begins, when and how it ends, and what happens if contract disputes or other legal issues arise. Including terms like this directly into the contract can greatly reduce the amount of money spent on litigation and contract disputes. It will also create stable and strong business relationships. Knowledge, understanding, and preparation; these are all keys to success when dealing with contracts and the law.
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