Contractors May Need to Comply with Virginia Consumer Protection Act

Interbuild, Inc. v. Sayres, 94 Va. Cir. 261 2016 Va. Cir. LEXIS 168, *13 (Va. Cir. Ct. Sept. 8, 2016).

Interbuild, Inc., t/a Fuog/Interbuild (“Fuog”) and the Sayres executed a contract in which Fuog was to build a barnlike recreational facility on the Sayres’ property that included a batting cage, swimming pool, exercise area and bathroom (“Project”). The contract price for the completed structure was $399,624. However, the Sayres terminated the contract after paying $239,714. Fuog filed a complaint against Sayres for breach of contract and quantum meruit. The Sayres filed a counterclaim against Fuog for fraud in the inducement, violation of the Virginia Consumer Protection Act (VCPA), and breach of contract. Fuog filed a demurrer as to the fraud and VCPA counts. In a letter opinion issued by Circuit Court Judge Fleming, the demurrers were overruled.

Fuog asserted two grounds for its demurrer as to the fraud claim, both relying in part on Richmond Metro. Auth. v. McDevitt St. Bovis: (1) that the Sayres’ fraud claim was based solely on allegations of unfulfilled promises; and (2) that the fraudulent acts alleged in Sayres’ fraud claim involved duties set forth in the Contract. The court quickly characterized Fuog’s arguments as misperceiving the fraud claim asserted by the Sayres. In this case, because the Sayres alleged fraud in the inducement of the contract as opposed to fraud in the performance of the contract, Fuog’s grounds for demurrer were not valid. The Court found that the allegations by the Sayres were sufficient to state an actionable claim for fraud in the inducement.

As to Count II, Fuog demurred alleging that its activities as a contractor are expressly excluded from the Virginia Consumer Protection Act (“VCPA” or “Act”). The VCPA allows a private cause of action for fraudulent acts or practices committed by a supplier of goods or services that can be actionable under Virginia Code § 59.1-204. However, there are exemptions to the VCPA. In particular, Fuog relied upon § 59.1-199(A), which excludes from the VCPA: “Any aspect of a consumer transaction which aspect is authorized under laws or regulations of this Commonwealth or the United States, or the formal advisory opinions of any regulatory body or official of this Commonwealth or the United States.” Fuog argued that the business of general contracting is excluded because it is already regulated by the statutory provisions of Code §§ 54.1-1000 through 54.1-1120 and therefore, the Sayres’ claim fails as a matter of law. The Court found otherwise, holding that the regulation of contractors by VA Code §§ 54.1-1000 through 54.1-1120 is insufficient to exempt contractors from the scope of the VCPA. The meaning of the word “authorized” in the exemption of § 59.1-199(A) are those “sanctioned by statute or regulation” as opposed to those merely regulated. Manassas Autocars, Inc. v. Couch, 274 Va. 82, 90 (2007). Additionally, the Court discussed the purpose of the VCPA in that it was enacted to protect consumers from such actions and misrepresentations that could be made during a consumer transaction. Therefore, the Sayres alleged sufficient facts in the Counterclaim to survive demurrer.

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