We have previously written about the Hensel Phelps case here and here and the result in that case arising from the Commonwealth’s complete immunity on state jobs from the normal five-year contract statute of limitations (in Hensel Phelps, a state agency was allowed to bring suit against a general contractor fourteen years after substantial completion). A recent Supreme Court of Virginia case arising in a different context highlights the need for either: (1) the General Assembly to change this law allowing the Commonwealth to bring stale lawsuits; or (2) general contractors to validly require subcontractors to share the risk of lawsuits brought years after substantial completion by requiring subcontractors to lawfully indemnify general contractors against such old claims. We have also written several posts on the general principles of indemnification.
In Radiance Capital, the Supreme Court of Virginia addressed whether a contractual waiver of the right to plead the statute of limitations was valid and enforceable under Virginia law. In Radiance Capital, two individual guarantors executed a personal guaranty of a promissory note in which the guarantors agreed to “waive the benefit of any statute of limitations or other defenses affecting the Guarantor’s liability” under the personal guaranty. While the case arose in a non-construction context, it is nonetheless instructive for Virginia construction professionals and the lawyers who advise them.
The Court found that the waiver in the personal guaranty was neither valid nor enforceable. First noting that a “waiver” of a statute of limitations defense is the same thing as a “promise not to plead” the statute of limitations, the Court went on to find that the waiver was not valid under Virginia statutory law because (1) it was made at the same time as another contract (the personal guaranty itself), (2) it was made for an indefinite period of time (forever), and (3) it was not made to avoid pending litigation.
This holding is important for Virginia contractors searching for protection from lawsuits instituted by the Commonwealth after the normal five-year statutory limitations period would otherwise have expired. While the 2015 decision in the Hensel Phelps case held that general flow-down provisions in subcontracts are not sufficient to cause subcontractors to waive a statute of limitations defense, we now know, from the Radiance Capital holding, that even very specific subcontract provisions attempting to require subcontractors to waive a statute of limitations defense will not be enforceable, for the same reasons that the attempted waiver in the personal guaranty in the Radiance Capital case was found to be not valid.
Instead, contractors looking for protection from stale claims made by the Commonwealth on state jobs should incorporate properly-drafted indemnification clauses in their subcontracts or material supply contracts, requiring indemnification protection in the event that the Commonwealth brings a lawsuit that causes the contractor to spend money to either defend or settle the case. Contractors should proceed cautiously, however, and seek the assistance of experienced construction counsel in order to avoid drafting an unenforceable indemnification provision, such as the one that the Supreme Court of Virginia found to be void in the Hensel Phelps case.
As president of Hirschler and head of the firm's litigation section, Courtney knows how to lead people and projects to a successful outcome.
Leveraging deep experience in the construction industry, Courtney advises public and ...
Liz combines enthusiasm and diligence to help her clients resolve complex disputes. Whether the dispute is a construction claim, a breach of contract, or a business tort, Liz brings focus and determination to every case. Liz has ...
Kelly’s practice focuses on construction law, commercial and product liability law, with an emphasis on dispute resolution—including mediation, arbitration, jury and bench trials in state and federal court. She routinely ...
Nate fully engages in each case and shoulders his clients’ needs. Communication, efficiency and careful judgment define his practice. In every case, he investigates competing claims to thoroughly understand their strengths ...
A professional engineer (P.E.) and an experienced lawyer, Webb began practicing at Hirschler Fleischer following four years of work as a consulting engineer. His multidisciplinary practice focuses on general business and ...
SubscribeSubscribe to Hirschler by Email
- Department of General Services Conducts “Town Hall” on Statute of Limitations Bill
- New Virginia Supreme Court Case Refocuses Attention on Commonwealth's Immunity from Statutes of Limitation
- Virginia Department of General Services Releases Survey on Statute of Limitations Issue
- Alternatives to Pay-if-Paid Provisions
- Changes to Mechanic’s Lien Law Effective July 1!
- Virginia General Assembly: Construction Bills To Watch- Part 2
- Courtney Paulk and Kelly Bundy Discuss “Unpreventable Employee Misconduct” Defense in Article for Construction Executive
- Five Licensure Issues All Virginia Contractors Should Consider
- New Trump Executive Order Encourages Buy American Preferences in Infrastructure Projects
- Five Issues all Subcontractors and Suppliers on Federal Projects Should Consider
- Government Contracts
- Little Miller Act
- Mechanic's Liens
- Occupational Safety and Health Act (OSHA)
- Department of Professional and Occupational Regulation (DPOR)
- Dispute Resolution
- Miller Act
- Workforce Development
- Virginia Employment Commission (VEC)
- Virginia Workers' Compensation Commission
- Uniform Statewide Building Code
- Change Orders
- November 2019
- August 2019
- June 2019
- April 2019
- February 2019
- January 2019
- December 2018
- October 2018
- September 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- November 2017
- October 2017
- September 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016