VCPA Applies to Consumer Transactions, Not Consumer Goods

The Virginia Consumer Protection Act is a Virginia law designed to protect consumers against fraudulent and deceptive business practices. In situations where it applies, defrauded consumers won’t be limited to suing for fraud; they will be entitled to pursue the additional remedies allowed by the VCPA, such as reimbursement of legal fees and–if the deception was willful–triple damages. The statute’s application, however, is limited to “consumer transactions.” What are those? According to the official statutory definition, “consumer transaction” means:

1. The advertisement, sale, lease, license or offering for sale, lease or license, of goods or services to be used primarily for personal, family or household purposes;
2. Transactions involving the advertisement, offer or sale to an individual of a business opportunity that requires both his expenditure of money or property and his personal services on a continuing basis and in which he has not been previously engaged;
3. Transactions involving the advertisement, offer or sale to an individual of goods or services relating to the individual’s finding or obtaining employment;
4. A layaway agreement, whereby part or all of the price of goods is payable in one or more payments subsequent to the making of the layaway agreement and the supplier retains possession of the goods and bears the risk of their loss or damage until the goods are paid in full according to the layaway agreement; and
5. Transactions involving the advertisement, sale, lease, or license, or the offering for sale, lease or license, of goods or services to a church or other religious body.

(See Va. Code § 59.1-198). The most common application of the VCPA is under the first part of the definition: “goods or services to be used primarily for personal, family or household purposes.” Does that mean that every contract to make or sell a personal or household item will be subject to the VCPA, regardless of the identity of the parties to the contract? The Virginia Supreme Court hasn’t yet spoken to this issue, but in a recent ruling out of Fairfax Circuit Court, the court said no.

In William Johnston v. Dietrich Stephan, the court held that what’s important is the character of the immediate transaction at issue, and not necessarily whether the product or service at issue is a consumer-type product or service to be purchased by a consumer down the road in some later transaction.

The basic facts of the case where these: the Stephans hired a general contractor to build a house on property they owned in Fairfax County. The general contractor subcontracted the roofing work to a roofing company. Three years later, the Stephans sold the house to the Johnstons, who became unhappy with the quality of the roofing work. The Johnstons asked the roofing subcontractor to come out and do some additional work on the roof. After it refused, the Johnstons sued for violation of the VCPA and other claims.

Seeking to dismiss the claim on a demurrer, the subcontractor pointed out that regardless of whether the roof was ultimately to be used by a family living in a house, the only transaction it had entered into was between it and the general contractor. There was no transaction between it and the Johnstons or any other consumer. The contract at issue was between two separate businesses, so the transaction at issue was really a business transaction and not a consumer transaction. The services provided were strictly for business purposes, even though what they were building was a roof to be used by a household. The court agreed.

Citing another Fairfax Circuit Court case, the court reasoned that “contractors who purchase materials for a construction project on a house do not fall under the definition because they are ‘a commercial entity [purchasing] goods from another commercial entity for commercial purposes; i.e., the construction of a home to be sold by [the contractor] (not lived in by [the contractor]).'”  The court held that for the VCPA to apply, the transaction must have occurred for a personal use, regardless of whether it was ultimately for the benefit of a consumer. It granted the subcontractor’s demurrer, finding that in this case, the subcontractor was “a commercial entity contracting with another commercial entity for the construction of a home, and therefore the transaction did not occur for a ‘personal, family, or household purpose.'” Rather, the roofing job was for a business purpose, so the VCPA did not apply.