When is a Residential Subcontractor not Subject to the VCPA? Read to Find Out
The Virginia Consumer Protection Act (VCPA) can and often does apply to residential construction. The transaction between a residential contractor and an homeowner has been held to fall under the consumer transaction language of the VCPA and on occasion been used to avoid the issues with the economic loss doctrine in Virginia. However, there are limits to how far down the contractual chain the VCPA applies, particularly in the case where a supplier or subcontractor does not provide the services or materials for a personal, consumer purpose.
An example of this fact is found in the case of Johnston v. Stephan. In that case, a couple hired a general contractor to build a home and the general contractor hired Cole Roofing System, Inc. to provide the roof of the home. The first couple subsequently sold the home and the second homeowners sought further work on the roof from Cole Roofing. After Cole Roofing refused further work, the homeowners brought an action seeking to enforce a warranty and for a violation of the VCPA. For the warranty claim, the homeowners relied on the contract between them and the prior homeowners that referenced a 10 year warranty on the roof and the subcontract between the homebuilder and Cole Roofing. Cole Roofing sought dismissal of the VCPA and warranty claims by demurrer and further sought by demurrer to have the matter dismissed as being filed after the running of the statute of limitations.
The Fairfax, Virginia Circuit Court granted the demurrer to the warranty and VCPA claims and denied the demurrer relating to the statute of limitations. As to the last of these, the Court simply stated that a demurrer is the wrong way to bring a statute of limitations defense. As to the warranty claims, the Court held that because there was no privity between the new homeowners and Cole Roofing that the warranty could not be enforced by the plaintiffs.
In denying the VCPA claim, the Court held that the transaction between the original homebuilder and Cole Roofing was not a consumer transaction because a contractor purchasing materials for a home is a transaction between two commercial entities for a commercial purpose (i. e. to build and sell a home as opposed to build and live in a home). Furthermore, the Court reasoned, there was no allegation of personal use by the homebuilder, as opposed to a purchase for the benefit of potential customers, the transaction at issue, between Cole Roofing and the homebuilder, was not a consumer transaction that fell under the VCPA. The Court additionally stated that the plaintiffs failed to allege any misrepresentation of material fact or that any such misrepresentation was a knowing misrepresentation.
In short, the Court ruled that the VCPA does not apply to transactions like that in the Johnston case, that are solely between businesses and for a commercial purpose.
Of course, each and every case is different and each case will require the analysis of the particular facts and legal issues presented. The help of an experienced Virginia construction attorney can help you as a supplier or subcontractor determine whether your transaction relating to a residential construction project could subject you to more than just contractual liability. I also recommend that you take the time to read the full opinion and make your own analysis.
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