As common practice, general contractors require a subcontractor to sign a release of claims for each progress payment as a condition for receiving that payment. Nearly every general contractor requires a subcontractor to sign a final release and waiver of all claims prior to receiving a final payment on the contract. Sophisticated construction parties must understand and appreciate the significance of these waivers and ensure that they have no outstanding claims prior to signing. However, depending on the jurisdiction and the language in the release, not all waivers are “equal” and may not apply to all claims between the parties. Like most legal principles, there are exceptions. A sophisticated contractor or owner (especially when working in a “new” jurisdiction) must be aware of these exceptions so that they can understand the effect of waiver language both upstream and down, including what claims a general waiver might not apply to.
On May 5, 2022, through APCO Construction, Inc. v. Helix Electric of Nevada, LLC, the Supreme Court of Nevada provided a good reminder for parties that, just because a party signed a waiver, does not mean a Court will enforce thewaiver against all claims between the parties. In the case, APCO Construction, the General Contractor, and Helix Electric, the Subcontractor, executed a subcontract for a job that was scheduled to be complete on January 9, 2013. However, for reasons beyond Helix’s control, APCO was delayed, and substantial completion was not achieved until October 25, 2013. Helix then sought $102,000 in delay damages.
In October 2014, approximately a year after substantial completion, APCO sent Helix a check for its final retainage payment with a conditional release and waiver which stated that, by signing the waiver, Helix is confirming that the retainage payment is the final payment for all of Helix’s Work and no outstanding claims remained. The general release and waiver indicated that the disputed-claim amount was “zero.” Helix signed the general release and waiver.
Nevada has a statute which governs releases and waivers of the right to receive payments. NRS § 338.490. The Nevada statute states that, any waiver required to be signed by a contractor to receive a payment must necessarily be “[l]imited to claims related to the invoiced amount.”
Helix sued APCO to enforce its delay claim. APCO refused and argued that Helix had waived its rights to the delay claim through signing the final release and waiver, which confirmed that the retainage was the final payment and that no outstanding claims remained. Helix argued that, under Nevada law, the general waiver was unenforceable as applied to the delay claim and instead, was simply limited to any claims against the retainage payment.
The Nevada Supreme Court ruled in Helix’s favor, interpreting NRS § 338.490 as governing the final release and waiver executed by the parties in October 2014 and finding that the final release and waiver only applied to claims associated with the retainage payment. Therefore, Helix had the right to pursue its delay claim despite the October 2014 waiver.
The APCO Construction opinion is a good lesson for any party to a construction contract that one needs to be deliberate and precise in terms of what waiver language is required and when. A general statement of waiver may not be sufficient to waive all claims, which can radically change the parties’ respective risk and liability on the Project. All parties to a construction contract must be sure to check the applicable state laws to understand the scope and limitations for enforcement of waiver language.