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FAQs About Construction Litigation in Washington

Wed, 03 May 2023 22:27:41 GMT

What Are Possible Claims in a Construction Litigation?

Breach of contract is a common claim in construction cases. Washington law provides that breach of contract is actionable if the contract imposes a duty, the duty is breached, and the breach causes damage. Breach of contract disputes can arise in the context of change orders, as well as over compensation for “extra work” or “additional work.” Under Washington law, a contractor may be entitled to further compensation, including reasonable profit, for extra work (work that is done in addition to or in excess of the contract’s requirements), but not for additional work (work that is necessarily required in the performance of the contract).

A claim for negligence can arise where an individual suffers personal or physical injuries resulting from the manner in which a building was constructed. That said, Washington generally does not recognize a cause of action for negligent construction on behalf of individual homeowners.

Breach of warranty is another claim that arises frequently in construction cases. The warranty may be express (contained in construction contracts, sales materials, or advertising/marketing materials) or implied. There is a limited implied warranty of habitability in Washington, which applies if the following requirements are met:

Builder-vendor must be a commercial builder;
The warranty applies only to the sale of new residential dwellings;
The warranty protects only the first occupants of residential property; and
The warranty covers only fundamental defects in the structure of a home (i.e., one that renders the home unfit for its intended purpose.

Claims for misrepresentation and fraud may be available in the construction context. The conduct at issue may be intentional or negligent.

What Are The Categories of Recoverable Damages?

Typically, there are several categories of damages that may be recovered in a construction case. Washington courts apply an “independent duty doctrine,” meaning that a plaintiff may be able to recover damages beyond what is provided for in the contract — such as damages for negligence or other wrongful conduct — if it can identify a duty owed independently of the contract.

The main categories of recoverable damages are:

Direct damages (those that accrue naturally from the breach, including any incidental or consequential losses)
Stigma damages (permanent loss or harm for diminution in value)
Delay damages (construction contracts often include a liquidated damages clause providing for a fixed measure of delay damages)

Which Statute of Limitations Will Apply?

There are a number of different limitations periods in construction law cases. If the action involves a written contract, a six-year statute of limitations will apply. Cases involving oral contracts have a three-year statute of limitation. A claim based on negligence also has a three-year statute of limitations. Fraud claims, and other cases involving intentional torts, have a two-year statute of limitations.

Generally speaking, the statute of limitations starts to run when the plaintiff’s cause of action accrues. In most cases, this occurs when the plaintiff suffers some form of injury or damage.

Sometimes there is a delay between the injury and the plaintiff’s discovery of it. When this happens, the court may apply what is known as the “discovery rule,” which pauses the statute of limitations until such time as the plaintiff knew or should have known (through the exercise of due diligence) all the facts necessary to establish a legal claim. The court will not apply the discovery rule if the delay was caused by the plaintiff sitting on his or her rights.

What is Washington's Statute of Repose?

Washington has a statute of repose that is applicable in the construction context. The statute terminates a right of action after a specified time, even if the injury has not yet occurred. A six-year statute of repose applies to actions arising out of the construction of a building. Importantly, the repose statute caps the discovery rule with a six-year overall bar.

How I Can Help

Lee Lewis is the founding member of HLL Law, which represents a select group of commercial contractors, design professionals, and public owners looking for elite, specialized construction industry legal and business guidance. If you are interested in exploring possible representation for your business, please join our waitlist .

Understanding the Miller Act's Bonding Requirements

Wed, 11 Jan 2023 21:52:57 GMT

Federal and State Bonding Requirements Under the Miller Act

The federal Miller Act requires general contractors on all federal public works projects to post two surety bonds as a condition of awarding the contract. First, a performance bond guaranteeing performance of the work must be posted. This bond, which is for the benefit of the federal government, must be in an amount the contracting officer considers adequate for the protection of the government.

Second, a payment bond guaranteeing payment to subcontractors and suppliers must be posted. This bond, which is for the benefit of the subcontractors and suppliers, must be equal to the total amount of the contract unless the contracting officer determines that amount is impractical. If so, the contracting officer may set the amount at not less than the amount of the performance bond.

Under Washington’s Little Miller Act , if the state government project exceeds $35,000, performance and payment bonds are required. If the contractor fails to complete the job, the wronged parties can file a claim against the bond within (30) days. No notice is required for subcontractors and suppliers who contract directly with the prime contractor. Otherwise, notice must be sent via certified mail to the prime contractor no later than 10 days after first delivery of materials or equipment. No notice is required for the labor portion of the claim.

Importantly, the Little Miller Act is what allows small to medium-sized contracting companies to compete at much higher levels, and to grow and succeed in their businesses.

How the Miller Act Protects Subcontractors and Their Suppliers

Importantly, when an action is filed by a first-tier subcontractor, their second-tier subcontractors and the second-tier subcontractor’s suppliers may also bring an action for the amount owed to them on the payment bond provided by the prime contractor. However, prior to suing, a second-tier subcontractor or their supplier must provide written notice to the prime contractor of its claim within 90 days from the date the last labor was furnished or materials supplied. After providing notice, a second-tier subcontractor or supplier may file a suit no later than one year after the last labor was furnished or materials supplied.

It should be noted that lower-tier subcontractors and suppliers are not protected under the Miller Act.

How the Miller Act Protects the Federal Government

The performance bond required under the Miller Act protects the federal government in the case of an unfinished project. If the general contractor defaults in the performance of its work or is terminated for cause, the United States may turn to the surety to step in and take over the contractor's obligations under the prime contract.

A Word About Mandatory Claim Pass-Through Provisions

Some subcontracts contain a mandatory “pass-through” provision for bringing claims against the government. Pass-through claims are made by a subcontractor against the government (with whom it has no contract) which are presented by the contractor (who has a contract with both the government and the subcontractor). The contractor acts as a conduit for the subcontractor’s claim against the government and shields itself from liability by limiting the subcontractor’s recovery to the amounts actually paid by the government.

It can take time for a subcontractor to submit a claim to the contractor, for the contractor to then pass the claim to the government and for the government to determine whether it will pay the claim. However, as this process plays out, the clock keeps ticking on the subcontractor’s one year deadline for filing its Miller Act bond claim. In other words, a mandatory pass-through provision—or any other contractual provision for that matter —will not toll or extend the filing deadline. Missing the deadline for filing a claim under the Miller Act is an absolute bar to recovery. Thus, the prudent course for a subcontractor with a mandatory pass-through provision is to commence a Miller Act suit before the deadline expires, and then stay the suit pending resolution of the pass-through claim. This leaves the bond open as an alternate source of recovery if the subcontractor does not fully recover on its pass-through claim.

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Construction Contract Notice of Protest Provisions: What to Expect From Washington Courts

Fri, 09 Dec 2022 22:03:47 GMT

Written Notice is Mandatory; Actual Notice is Not Enough

Washington’s Supreme Court has stated on several occasions that if a notice of protest provision requires written notice, then such notice is mandatory and actual notice will not suffice. In other words, even if the owner had actual knowledge of the change, any claim for additional compensation is waived unless the contractor strictly complied with the written notice requirements. In a 2018 case, Nova Contracting v. City of Olympia, the contractor argued that it was not required to file a written protest after each rejected batch of submittals because it filed a claim for breach of the covenant of good faith and fair dealing based on the rejections, thereby giving the City actual notice of its protest. The Court disagreed, stating that because the claim is based entirely on the City’s allegedly improper rejection of its submittals, and Nova did not file a written protest immediately, it waived any claims for protested work.

The Nova decision follows other cases in which this state’s highest court has required strict compliance with notice of disputes provisions. In Mike M. Johnson, Inc. v. County of Spokane, the Court rejected an “actual notice” exception and held that the contractor’s claims for equitable adjustment due to design changes mid-performance were barred because contractual notice had not been given. In American Safety Cas. Ins. Co. v. City of Olympia, the Court ruled that a public works contractor waived its claims for increased compensation by not timely following the contract’s disputes process.

Requirement Not Limited by Implied Covenant of Good Faith and Fair Dealing

The contractor in the Nova case argued that the notice of protest provision did not apply to its claim for breach of the covenant of good faith and fair dealing because such a claim sounds in equity. However, the court rejected the premise of this argument, stating that breach of the covenant sounds in contract, not equity. The court reiterated that the contractor, by failing to comply with provision, waived “any claims for protested Work,” including a claim that the City’s improper rejection of its submittals violated the implied covenant. In addition, the Court in Nova held that the written notice requirement also applies to claims for expectancy and consequential damages.

Waiver of the Notice of Protest Provision by the Municipality is Possible

Washington courts have stated that if the party in whose favor the provision acts waives the protection, the notice requirement may not be enforced. That said, unequivocal evidence of an intent to waive must be shown, and this is a tough standard to satisfy. In the American Safety case, the Supreme Court held that an owner’s agreeing to enter into negotiations, without more, does not constitute an implied waiver of contractual rights.

Quantum Meruit Recovery is Still Available for Work Outside the Contract

The Court of Appeals has held, in General Construction Company v. Public Utility District No. 2 of Grant County, that for work outside of the contract, quantum meruit (as much as deserved) applies and entitles the contractor to compensation. Relying on the Supreme Court’s decision in Bignold v. King County, the Court of Appeals stated that this is a supplemental means of recovery when the contract is not applicable. But what work qualifies as being “outside” the contract remains a contentious issue. Contractors should not assume that a court will agree that the work for which they claim additional money or time is extra-contractual.

The Takeaway: Give Immediate Written Notice of any Potential Claims

Unless and until the state legislature steps in, Washington contractors are bound by the strict compliance standard. Although the Mike M. Johnson case contains a lengthy dissent (calling it unjust and out of step with Washington law to deny a contractor fair compensation where the owner had actual notice but the contractor did not also comply with “highly technical claims procedures”), and some commentators have advocated for a prejudicial standard instead (which would make it consistent with federal law), there is no sign of a change in the Washington courts.

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Welcome to our new website!

Wed, 30 Dec 2020 21:19:05 GMT

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