01/16/2023

Editor's Notes

A contractor’s receivables are a valuable asset. They represent billings for completed work, and there is a reasonable expectation they will soon become cash. Other parties may also have a legal interest in the contractor’s receivables—the contractor’s lending bank may have a perfected security interest, and the contractor’s bonding company has a contractual right to receivables derived from a bonded contract. But, what happens when these interests are in conflict?

 

The Virginia Supreme Court recently issued a lengthy opinion addressing one of these conflicts when the contractor was in default. A bank had a security interest in contractor receivables as collateral on a line of credit. A surety had the right, by virtue of its contract with the contractor, to the receivables from bonded contracts. The court had to rely on Virginia case law and the Uniform Commercial Code to determine who should receive the receivables.

 

The second case in this issue involves financial compensation for a disappointed bidder who shed light on an illegality in a contract award. Should the protester recover anticipated profit on an unperformed contract? Or was it enough that the protester had the opportunity to compete again when the project was rebid?

 

The third case addresses the use of text messages to discuss and authorize changes in the scope of work. Could the project owner still enforce the contract requirement for written, executed change orders? Or did the owner’s participation in the text communication result in a mutual waiver of the change order requirement?

 

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