Present: All the Justices 

GORDONSVILLE ENERGY, L.P. 

v. Record No. 980813 OPINION BY JUSTICE BARBARA MILANO KEENAN 

 February 26, 1999 

VIRGINIA ELECTRIC AND 

POWER COMPANY 

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 

Randall G. Johnson, Judge 

In this appeal, we determine whether the terms of a 

contract between Virginia Electric and Power Company (Virginia 

Power) and Gordonsville Energy, L.P. (Gordonsville) entitle 

Virginia Power to recover liquidated damages for an 11-day 

period in which Gordonsville's electric power plant was "shut 

down" due to a mechanical failure. 

Under the parties' "Power Purchase and Operating Agreement" 

(the Contract), Gordonsville agreed to build a $200 million 

electric power facility capable of producing electricity for 

sale exclusively to Virginia Power. The Gordonsville facility 

consists of two identical electric generating plants, designated 

as Unit 1 and Unit 2. The outage at issue in this dispute 

involves Unit 1. 

Article 8 of the Contract, entitled "Interconnection," 

provides in § 8.2 that Gordonsville "shall be responsible for 

the design, construction, installation, maintenance and 

ownership of the Facility." "The Facility" is defined as 

including "all energy producing equipment." 
The Gordonsville facility began operating in June 1994. 

When Virginia Power requires electricity from Gordonsville, 

Virginia Power "dispatches" Gordonsville by notifying it of the 

number of kilowatts required. Gordonsville responds by 

producing the electricity and supplying it to Virginia Power's 

distribution system. Since the Gordonsville facility went into 

service in 1994, Virginia Power has "dispatched" Gordonsville 

only about 15 to 20 percent of the time. A typical dispatch of 

the Gordonsville facility lasts four to six hours. 

Virginia Power makes two types of payments to Gordonsville 

under the Contract. The first type is made for Gordonsville's 

"Net Electrical Output," or the net amount of kilowatt hours of 

electricity actually delivered by Gordonsville to Virginia 

Power. This payment amount varies from month to month. 

The second type of payment, termed "Capacity Payments," is 

a fixed monthly payment for Gordonsville's "Dependable 

Capacity," which represents the amount of electricity available 

for dispatch at Virginia Power's request from the Gordonsville 

facility. The Capacity Payments were designed to compensate 

Gordonsville for the costs incurred in building its facility, as 

well as the fixed costs related to operating and maintaining the 

facility. At the time this dispute arose, Virginia Power was 

obligated under the Contract to make Capacity Payments of about 

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$1.2 million per month, or $40,000 per day, for each of the two 

units in the Gordonsville facility. 

The Contract defines two types of "outages" that may occur 

when either unit of Gordonsville's facility is unavailable for a 

potential dispatch request from Virginia Power. A "Scheduled 

Outage" is a planned interruption in the operation of a unit of 

the facility that has been coordinated in advance with Virginia 

Power for the purpose of conducting inspections or routine 

maintenance. During Scheduled Outages, Virginia Power remains 

obligated to make Capacity Payments to Gordonsville. 

A "Forced Outage" is defined in § 1.18 of the Contract as 

"[a]n occurrence where: (i) any or all of [a unit's] Dependable 

Capacity is not available for Dispatch; or (ii) [a unit's] 

delivery of Net Electrical Output deviates from Virginia Power's 

Dispatch level by greater than ±5%." Section 1.20 defines a 

"Forced Outage Day" as "[a] continuous twenty-four (24) hour 

period (a) beginning with the start of a Forced Outage, 

regardless of the number of actual outages that may occur during 

such twenty-four (24) hour period(s), and (b) designated by 

[Gordonsville] as a Forced Outage Day." 

A "Force Majeure Day" is defined in § 1.19 as "a Forced 

Outage Day that is both (i) excused under the provisions of 

Article 14 and (ii) . . . designated as a Force Majeure Day by 

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[Gordonsville]." Section 14.1 of the Contract provides, in 

relevant part: 

[N]either Party shall be responsible or liable for 

or deemed in breach hereof because of any delay or 

failure in the performance of their respective 

obligations hereunder to the extent that such delay 

or failure is due solely to circumstances beyond the 

reasonable control of the Party experiencing such 

delay or failure, including but not limited to acts 

of God; unusually severe weather conditions; strikes 

or other labor difficulties; war; riots; 

requirements, actions or failures to act on the part 

of governmental authorities preventing performance; 

inability despite due diligence to obtain, maintain 

or renew required licenses; accident; fire; damage 

to or breakdown of power generation materials and 

equipment that is not caused by normal wear and 

tear; or transportation delays or accidents. 

(Emphasis added.) 

Under the Contract, Gordonsville is allowed a specified 

number of Forced Outage Days during the facility's initial six 

months of operation and for each one-year period thereafter 

throughout the 30-year term of the Contract. The Contract 

further provides in § 10.18: 

The Parties agree that Virginia Power will be 

substantially damaged in amounts that will be 

difficult or impossible to determine if . . . the 

Facility exceeds the allowance for Forced Outage 

Days . . . Therefore, . . . the Parties have agreed 

on sums which the Parties agree are reasonable as 

liquidated damages for such occurrences. It is 

further understood and agreed that the payment of 

the liquidated damages is in lieu of actual damages 

for such occurrences. [Gordonsville] hereby waives 

any defense as to the validity of any liquidated 

damages stated in this Agreement as they may appear 

on the grounds that such liquidated damages are void 

as penalties or are not reasonably related to actual 

damages. 

4
For each Forced Outage Day in excess of the allowed number, 

§ 10.15 of the Contract directs that Virginia Power's Capacity 

Payments will be reduced by $600,000 per day as liquidated 

damages. The Contract also states that this liquidated damages 

provision does not apply if a Forced Outage Day qualifies as a 

Force Majeure Day. However, the Contract relieves Virginia 

Power of its obligation to make Capacity Payments to 

Gordonsville for such Force Majeure Days. 

In September 1995, while Unit 1 was operating under a 

dispatch from Virginia Power, an alarm indicated an electrical 

short circuit inside the Unit's 100-ton steam turbine generator. 

The generator had been manufactured for Gordonsville by General 

Electric Company (General Electric), one of two manufacturers of 

that type generator in the United States. Gordonsville 

personnel performed tests on the generator for several days, but 

were not able to determine the cause of the short circuit. On 

September 9, 1995, Kenneth Nieman, the executive director of the 

Gordonsville facility, decided to "shut down" Unit 1 and "take 

it off line" so that the generator problem could be diagnosed 

and repaired. On September 12, 1995, Gordonsville notified 

Virginia Power that Unit 1 was experiencing an event of Force 

Majeure and was unavailable for dispatch until further notice. 

Personnel from General Electric and Gordonsville disassembled 

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the generator and shipped its 17-ton rotor to a General Electric 

facility in Richmond, where it was determined that a copper 

"pole-to-pole" connector inside the rotor had failed. Unit 1 

was returned to service on September 20, 1995, 11 days after it 

had been "shut down." 

Virginia Power concluded that the 11 outage days in 

September 1995, did not qualify as Force Majeure Days and 

informed Gordonsville that, for this reason, those days 

constituted unexcused Forced Outage Days under the Contract. 

Virginia Power also informed Gordonsville that it previously had 

exhausted its allowance of Forced Outage Days. Virginia Power 

asserted a claim against Gordonsville for a total of $6.6 

million in liquidated damages under the Contract for the 11-day 

period, and began withholding $600,000 per month from its 

payments to Gordonsville. 

 Gordonsville filed a motion for judgment against Virginia 

Power in the trial court, alleging breach of contract based on 

Virginia Power's "wrongful assessment of liquidated damages" as 

a result of the September 1995 outage. In Count I, Gordonsville 

alleged that all 11 days of the September 1995 outage were Force 

Majeure Days and that, therefore, Virginia Power was not 

entitled to liquidated damages. Gordonsville alleged in the 

alternative in Count II that even if the September 1995 outage 

did not result from a Force Majeure event, Gordonsville was 

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entitled to count three of the outage days as allowed Forced 

Outage Days. Thus, Gordonsville alleged that Virginia Power was 

not entitled to $1.8 million of the $6.6 million claimed in 

liquidated damages. In Count V, Gordonsville essentially 

alleged that the liquidated damages clause of the Contract was 

an unenforceable penalty.1

 The trial court sustained Virginia Power's demurrer and 

plea of res judicata or collateral estoppel addressed to Count 

V, holding that it was bound by its ruling on the same issue in 

an earlier action between the parties, which arose from two 

unrelated outages at the Gordonsville facility in June-July 

1994, and February 1995. In that earlier action, the court had 

ruled that the liquidated damages provision of the Contract was 

not an unenforceable penalty. 

 The trial court ruled in the alternative that even if this 

issue was not barred by res judicata or collateral estoppel, 

Virginia Power was entitled to summary judgment on Count V. 

Based on its assumption that the evidence in the pending case 

concerning the liquidated damages clause would not differ from 

the evidence presented in the prior action, the court awarded 

summary judgment for Virginia Power on Count V for "reasons of 

judicial economy," but permitted Gordonsville to submit a 

 1

Gordonsville alleged two other Counts in its motion for 

judgment that are not at issue on appeal. 

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written offer of proof for the court's consideration. Following 

Gordonsville's submission of the offer of proof, the trial court 

entered an order affirming its award of summary judgment for 

Virginia Power on Count V. 

 The trial court then considered the parties' cross motions 

for summary judgment on Count II. In the prior action between 

the parties, the jury had found that the June-July 1994 and 

February 1995 outages were caused by Force Majeure events. 

Gordonsville argued that because of that finding, those outage 

days could not be counted toward the number of Forced Outage 

Days allowed under the Contract. Gordonsville argued, 

therefore, that it still had three allowed Forced Outage Days 

available to be applied to the September 1995 outage. The trial 

court ruled that although the earlier 1994 and 1995 outage days 

constituted Force Majeure Days, they also constituted Forced 

Outage Days under the terms of the Contract, and that these 

outage days must be counted in computing Gordonsville's allowed 

number of Forced Outage Days. The trial court awarded summary 

judgment for Virginia Power on Count II. 

 The claims asserted in Count I were tried before a jury. 

Thomas Butler, who qualified as an expert in mechanical 

engineering, testified that the pole-to-pole connector in the 

generator rotor of Unit 1 failed because it had been improperly 

brazed, or soldered, during its manufacture and assembly. 

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Butler further testified that the connector did not fail due to 

normal wear and tear, and that there was nothing Gordonsville 

"could [have] or should have done" to prevent failure of the 

connector. 

 Robert Hamilton, a retired mechanical engineer who had 

worked for General Electric for about 36 years, also testified 

as an expert witness. He explained that the General Electric 

workers who manufactured and assembled the pole-to-pole 

connector used in the Gordonsville generator were required to 

follow detailed drawings. In essence, Hamilton testified that 

one of the drawings contained a mistake and deviated from the 

actual design requirements because the drawing showed a rigid, 

brazed piece, rather than a flexible piece, extending into an 

area of the connector. Hamilton concluded that the Gordonsville 

generator failed due to the inability of the defective pole-topole connector to withstand normal wear and tear. He further 

testified that a properly manufactured pole-to-pole connector 

should not wear out, but should "last forever." In Hamilton's 

opinion, if the Gordonsville pole-to-pole connector had been 

manufactured in accordance with General Electric's own design 

requirements, the generator failure would not have occurred. 

 In contrast to Hamilton's testimony, Robert Fenton, a 

retired electrical engineer who was formerly a general manager 

of generator design and engineering at General Electric, 

9
testified that there was nothing General Electric could have 

done differently that would have prevented the failure of the 

pole-to-pole connector in Gordonsville's generator. In Fenton's 

opinion, the failure of the Gordonsville generator was a 

"random, unexpected failure."

 Over Gordonsville's objection, the trial court gave the 

jury Instruction No. 10, which stated: 

Gordonsville Energy is responsible to Virginia Power 

under the parties' contract for the design and 

construction of Gordonsville Energy's electric 

generating facility, including the steam turbine 

generator, its rotor and the rotor's component parts 

that failed in September, 1995. Although 

Gordonsville Energy relied on General Electric 

Company to design and construct the rotor, 

Gordonsville Energy is responsible to Virginia Power 

for General Electric's performance of those 

activities just as if Gordonsville Energy had 

performed them itself. 

 The jury returned its verdict in favor of Virginia Power, 

finding that "the [September 1995] outage was not a force 

majeure event." The trial court entered final judgment in favor 

of Virginia Power, and this appeal followed. 

 Gordonsville first argues that the trial court erred in 

granting Instruction No. 10 because the instruction improperly 

directed the jury to impute to Gordonsville any act of 

negligence by General Electric. Gordonsville also asserts that, 

as a matter of law, the outage in September 1995 was a Force 

Majeure event under the terms of the Contract because there was 

10
no evidence of negligence by Gordonsville. Thus, it contends 

that the jury was required by the evidence to find that the 

September 1995 outage was "beyond the control" of Gordonsville 

and resulted in Force Majeure Days under the Contract. We 

disagree with Gordonsville's arguments. 

 In granting Instruction No. 10, the trial court ruled that 

the Contract did not excuse Gordonsville's failure to perform 

under the Contract if the failure was caused by the negligence 

of a subcontractor retained by Gordonsville to perform functions 

for which Gordonsville was responsible. Under familiar 

principles of contract interpretation, we reach the same 

conclusion and hold that the trial court did not err in granting 

Instruction No. 10. 

 It is the duty of the court, not the jury, to interpret a 

contract when its terms are clear and unambiguous. D.C. 

McClain, Inc. v. Arlington County, 249 Va. 131, 135, 452 S.E.2d 

659, 662 (1995); Winn v. Aleda Const. Co., 227 Va. 304, 307, 315 

S.E.2d 193, 194 (1984). The court must interpret the contract 

as a whole to determine the parties' intent. Westmoreland-LG&E 

Partners v. Virginia Elec. and Power Co., 254 Va. 1, 11, 486 

S.E.2d 289, 294 (1997). Since the interpretation of plain and 

unambiguous terms of a contract is a question of law, we are not 

bound by the trial court's determination and are afforded the 

same opportunity as the trial court to review the contract 

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provisions. C.F. Garcia Enterprises, Inc. v. Enterprise Ford 

Tractor, Inc., 253 Va. 104, 107, 480 S.E.2d 497, 498-99 (1997); 

Tuomala v. Regent Univ., 252 Va. 368, 374, 477 S.E.2d 501, 505 

(1996); Langman v. Alumni Ass'n of the Univ. of Va., 247 Va. 

491, 498, 442 S.E.2d 669, 674 (1994). 

 In § 8.2 of the Contract, the parties agreed, in plain and 

unambiguous language, that Gordonsville was "responsible for the 

design, construction [and] installation" of the Facility, which 

is defined in § 1.16 of the Contract as "all energy producing 

equipment." In a later section of the Contract, § 14.1, the 

parties agreed that an outage would be excused if it was "due 

solely to circumstances beyond [Gordonsville's] reasonable 

control . . . including . . . damage to or breakdown of power 

generation materials and equipment that is not caused by normal 

wear and tear." 

 The provisions of § 14.1 do not override or alter the 

allocation of responsibilities set out in § 8.2. By its plain 

terms, § 14.1 does not purport to address the duties of parties 

to the Contract. Instead, that section addresses the 

circumstances under which the failure of performance of 

contractual duties will be excused as Force Majeure days. Thus, 

under the Contract, Gordonsville remained responsible for the 

contractual obligations it subcontracted to General Electric and 

was excused from performance only if an outage also was "beyond 

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the reasonable control" of any subcontractors hired to perform 

Gordonsville's duties set forth in § 8.2. 

 The evidence did not establish as a matter of law that the 

September 1995 outage was beyond Gordonsville's reasonable 

control. The evidence showed that the failure of the pole-topole connector was either a random, unexpected occurrence or the 

result of negligence by General Electric. In returning its 

verdict in favor of Virginia Power, the jury necessarily 

rejected the proposition that the failure was a random, 

unexpected occurrence. 

 Gordonsville next contends that the trial court erred in 

holding that the Force Majeure Days from the previous 1994 and 

1995 outages should be counted against Gordonsville's allowance 

of Forced Outage Days. Gordonsville argues that summary 

judgment on Count II should have been entered in its favor, 

because a Force Majeure day is an excused "Forced Outage Day" 

for which Gordonsville merely loses its Capacity Payment under 

§ 10.15 of the Contract. 

 In response, Virginia Power argues that the Contract 

specifically designates Force Majeure Days as Forced Outage 

Days. Thus, Virginia Power contends that the trial court 

properly concluded that the earlier Force Majeure Days had to be 

included in Gordonsville's allotment of Forced Outage Days. We 

13
disagree and hold that the trial court erred in granting summary 

judgment in favor of Virginia Power on Count II. 

 As the trial court correctly noted, § 1.19 of the Contract 

defines a Force Majeure Day as "a Forced Outage Day that is 

. . . excused under the provisions of Article 14." When 

contract terms are clear and unambiguous, the words used by the 

parties must be given their plain and ordinary meanings. Hutter 

v. Heilmann, 252 Va. 227, 231, 475 S.E.2d 267, 270 (1996); 

Marina Shores, Ltd. v. Cohn-Phillips, Ltd., 246 Va. 222, 225-26, 

435 S.E.2d 136, 138 (1993). In the context of the Contract 

provisions, the usual and customary meaning of the term "excuse" 

is "to grant [an] exemption . . . to or from." Webster's Third 

New International Dictionary 794 (1993). The Contract only 

limits the scope of the exemption for Force Majeure Days by 

eliminating the Capacity Payment of about $40,000 to 

Gordonsville for each such day.2 Since the Contract does not 

otherwise limit the exemption provided for Force Majeure Days, 

such days are excused, or exempted, under the Contract from 

being counted toward the number of allowed Forced Outage Days. 

 This conclusion also is supported by the plain language of 

§ 14.4, which provides that "each Day of a Forced Outage excused 

under this Article 14 shall be considered a Forced Outage Day 

 

2

This limitation of exemption is contained in § 10.15(b) 

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unless [Gordonsville] appropriately designates such Day as a 

Force Majeure Day." This language compels the conclusion that a 

day that is appropriately designated as a Force Majeure Day and 

is excused under Article 14 is not "considered a Forced Outage 

Day" under the terms of the Contract. Thus, the trial court 

erred in ruling that the earlier 1994 and 1995 Force Majeure 

Days were Forced Outage Days chargeable to Gordonsville in 

computing the number of Forced Outage Days allowed under the 

Contract. Therefore, we conclude that the trial court erred in 

awarding summary judgment for Virginia Power on Count II and in 

failing to award summary judgment for Gordonsville on that 

Count.3

 Finally, Gordonsville argues that the trial court erred in 

dismissing Count V of the motion for judgment because 

Gordonsville's offer of proof established that the liquidated 

damages clause of the Contract constituted an unenforceable 

penalty. Virginia Power responds, in part, that Gordonsville is 

 

of the Contract. 

3

Virginia Power argues on appeal that an additional, 

independent basis exists for affirming the trial court's award 

of summary judgment in its favor on Count II. Virginia Power 

argues that Gordonsville's motion for judgment alleged that the 

last three days of the September 1995 outage should be counted 

as allowed Forced Outage Days, when Gordonsville should have 

alleged that the first three days of the outage were allowed. 

Since this claim was not raised before the trial court, we will 

not address it for the first time on appeal. See Rule 5:25. 

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barred from contesting the reasonableness of the liquidated 

damages clause since it waived in the Contract the right to 

raise such an objection.4

 The Contract provides in § 10.18 that Gordonsville "waives 

any defense as to the validity of any liquidated damages stated 

in this Agreement as they may appear on the grounds that such 

liquidated damages are void as penalties or are not reasonably 

related to actual damages." Nevertheless, Gordonsville argues 

that it should be relieved from this contractual obligation 

because such a waiver violates public policy. We disagree with 

Gordonsville’s argument. 

 This Court has recognized that a liquidated damages 

provision may constitute a penalty and, therefore, be 

unenforceable when the amount agreed to is "out of all 

proportion to the probable loss." Brooks v. Bankson, 248 Va. 

197, 208, 445 S.E.2d 473, 479 (1994); Taylor v. Sanders, 233 Va. 

73, 75, 353 S.E.2d 745, 746-47 (1987). Such a provision also 

may constitute an unenforceable penalty if the agreed amount is 

 4

We find no merit in Gordonsville's contention that Virginia 

Power is procedurally barred from asserting that Gordonsville 

waived its objection to the Contract's liquidated damages 

provision, because Virginia Power did not assign cross-error to 

an alleged ruling by the trial court that the waiver was 

unenforceable. The trial court did not rule on this issue in 

this action and did not expressly adopt such a ruling from the 

earlier action. Thus, an assignment of cross-error was not 

required under Rule 5:18. 

16
"grossly in excess of actual damages." O'Brian v. Langley 

School, 256 Va. 547, 551, 507 S.E.2d 363, 365 (1998). However, 

it is equally well-settled that a term of the parties' contract 

becomes the law of the case unless such term is repugnant to 

public policy or to some rule of law. Rash v. Hilb, Rogal & 

Hamilton Co. of Richmond, 251 Va. 281, 285, 467 S.E.2d 791, 794 

(1996); D.C. McClain, Inc., 249 Va. at 135, 452 S.E.2d at 662. 

 We decline to hold that Gordonsville's contractual waiver 

of the right to object to a liquidated damages clause is 

"repugnant to public policy." We long have recognized that a 

party may enter into an agreement in which he waives a 

significant right. See e.g., Blue Cross of Southwestern Va. v. 

McDevitt & Street Co., 234 Va. 191, 196-97, 360 S.E.2d 825, 828 

(1987) (waiver of right to claim damages); Flintkote Co. v. W.W. 

Wilkinson, Inc., 220 Va. 564, 570, 260 S.E.2d 229, 232 (1979) 

(waiver of right to jury trial on amount of attorney's fees); 

VNB Mortgage Corp. v. Lone Star Indus., Inc., 215 Va. 366, 369, 

209 S.E.2d 909, 912 (1974) (waiver of right to file mechanic's 

lien). 

 Generally, a party may waive by contract any right 

conferred by law or contract. See Roenke v. Virginia Farm 

Bureau Mut. Ins. Co., 209 Va. 128, 135, 161 S.E.2d 704, 709 

(1968); Woodmen of the World Life Ins. Soc. v. Grant, 185 Va. 

288, 299, 38 S.E.2d 450, 454 (1946). If the party being charged 

17
with relinquishment of a right had knowledge of the right and 

intended to waive it, the waiver will be enforced. Roenke, 209 

Va. at 135, 161 S.E.2d at 709; Woodmen, 185 Va. at 299, 38 

S.E.2d at 454. 

 Gordonsville raised no allegation at trial and presented no 

evidence that it entered into § 10.18 of the Contract under 

duress, or as the result of fraud or mistake, or under any other 

circumstances that might serve as a basis for declaring the 

waiver unenforceable. Instead, the evidence at trial 

established that the entire Contract resulted from extended, 

"arms-length" negotiations between two sophisticated corporate 

entities, both represented by counsel. Therefore, we conclude 

that Gordonsville's contractual waiver is enforceable and bars 

its claims alleged in Count V.5

 For these reasons, we will affirm the trial court's 

judgment in favor of Virginia Power on Counts I and V. We will 

also reverse the trial court's judgment on Count II and enter 

final judgment in favor of Gordonsville on that Count. 

 Affirmed in part, 

 reversed in part, 

and final judgment.

 5

Since Gordonsville waived any objection to the 

reasonableness of the liquidated damages clause, we do not 

address Gordonsville's assignment of error concerning the trial 

court's application of res judicata or collateral estoppel to 

bar relitigation of the validity of the liquidated damages 

provision. 

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