Contractor Liable for Legal Fees in CRA Suit
Under the Contractor Registration Act (CRA), contractors are required to obtain a surety bond of ordinarily $12,000 in penal sum. See RCW 18.27.040. Because of the small size of the bond, this statute doesn't get a lot of attention and doesn't raise much liability concern in the typical case.
Under a new decision from Division II, however, the risk of being hit with a large legal fee will often eclipse the liability under the bond itself. In Cosmopolitan Eng'g. Group v. Ondeo Degremont, Inc., an engineering subconsultant sued both its prime engineer and the property owner for unpaid bills after assisting in evaulating the feasibility of modifying a brewery facility in Olympia. The case went to trial and the subconsultant won. The jury awarded $104,420.
The issue on appeal was who has to pay the prevailing party's legal fees and in what amount. Overruling the trial court, Division II held that the contractor itself must pay the other side's fees (rather than limiting that obligation to the bond, as the trial court ruled). As a correlary, the Court of Appeals also seems to have held that the amount of the fee award is not capped by the size of the bond at least as it relates to the contractor's liability.
The impact of this case will depend on your contract. If you already have a clause in your contract that entitles the other side to collect its legal fees in the event of a suit, the case probably adds nothing new to the mix. But if you have an oral contract or a written contract which is silent on the issue of legal fee recovery, this case does inject a solid new shot of liability into what many contractors regard as a low-risk statute.