Another Reminder that Contracts are Powerful in Virginia

Christopher G. Hill | Construction Law Musings

Regular readers of this construction law blog are likely tired of my refrain that the contract is king here in Virginia.  With few exceptions, some of which have been passed in the last few years, the contract can and does essentially set the “law” for the transaction.  A recent opinion from the 4th Circuit Court of Appeals confirms this principle.

In Bracey v. Lancaster Foods, LLC, the Court looked at the question as to whether parties can contractually limit the statute of limitations in which a plaintiff or arbitration claimant can file its claim for relief.  In Bracey, Michael Bracey, a truck driver, sued his former employer, Lancaster Foods, asserting various employment law claims. Lancaster moved to dismiss and compel arbitration based on the terms of an alternative dispute resolution agreement Bracey signed when he was hired, under which he consented to arbitration of any employment-related claim and waived all rights he may otherwise have had to a trial. Bracey challenged the arbitration clause, one that also included a 1-year limitation on the time in which Bracey was allowed to file any claim, as unconscionable.  A federal judge in Maryland agreed and granted the motion to dismiss.

After dispensing with some procedural formalities, the 4th Circuit agreed with the lower court stating:

[a]s a general rule, statutory limitations periods may be shortened by agreement, so long as the limitations period is not unreasonably short” and the statute at issue does not prohibit a shortened limitations period. In reaching this decision, we explained that “[c]ourts have frequently found contractual limitations periods of one year (or less) to be reasonable.

While Bracey argues that it would be difficult to exhaust his claims before the EEOC prior to making a demand for arbitration, it is not entirely clear that administrative exhaustion would even be required when the parties contractually agree to resolve employment disputes in arbitration.

In short, even in the instance where there could be other factors that would make the shortened limitations period a burden on a claimant, there is no categorical rule that states that a shorter limitations period is unconscionable when entered into by contract.

While this is not a construction case, it does highlight the need to carefully review your construction contracts with the help of an experienced Virginia construction attorney.  Absent a careful review and possible edit of the contract, you could be stuck with a limitations period shorter than that of the applicable statute.

As always, I recommend that you read the opinion in its entirety and draw your own conclusions.

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