Construction Law Blog

Parties to a construction contract should pay particular attention to the contract’s terms concerning claims.  Statutory limitations periods may be shortened or extended. 

When things go wrong on a construction project, owners and contractors alike may need time to investigate and assert a potential claim. Parties should not have to fear the prospect of litigation indefinitely; all have an interest in having finality as to what will happen next and whether it will be necessary to mount a defense to a claim. Beyond the parties involved, the public has an interest in making sure that court resources are utilized efficiently. State legislatures weigh these competing interests when establishing “statutes of limitation,” which are laws that establish time periods for filing suit under written contracts, including construction contracts. In Virginia, a person has five (5) years from the date that a construction contract was allegedly breached to file a lawsuit.

Statutes of limitation can be changed, however, by the terms of the contract or by a subsequent agreement. A statutory limitation period can be made either shorter or longer. If parties are attempting to resolve a contract dispute, they may enter into a “tolling agreement,” to “toll,”  the statute of limitations, thus lengthening the limitation period. 

The new 2017 AIA General Conditions of the Contract for Construction (AIA Document A201) defers to state statutes of limitation with respect to the time for claims to be made, however an outside date of 10 years from substantial completion is also specified, after which time the ability to bring a claim expires.  Because the 10-year period is so much longer than almost all state statutory limitation periods, the practical effect of using the 2017 AIA construction contracts is that regular state statutory law will apply to determine the time in which a party has to file a lawsuit.

Statutes of limitation can also be shortened by the terms of a contact. A 2017 case by the Maryland Court of Appeals illustrates how this might work. In Ceccone v. Carroll Home Services, LLC, Mr. and Mrs. Ceccone entered into a maintenance contract with an HVAC contractor for maintenance and repair of the Ceccones’ residential oil-fueled furnace. The written contract contained a clause requiring that any lawsuit brought by the Ceccones be filed within one (1) year of the event giving rise to the lawsuit, thus shortening the Maryland statutory three-year period. Interestingly, the contract did not impose the same shortened limitation period on the HVAC contractor. The Ceccones subsequently filed a lawsuit against the HVAC contractor more than one year—but less than three years—after a dispute arose. The trial court threw out the case summarily, citing the one-year limitation period imposed by the contract.

The Maryland Court of Appeals, however, remanded the case back to the trial court, holding that the trial court acted too quickly in dismissing the Ceccones’ case and did not conduct a proper inquiry to determine the enforceability of the contract’s limitations period. In particular, the trial court needed to examine at least three issues before deciding whether the contract’s shortened limitation period was enforceable. The Court of Appeals held that the trial court should examine: (1) whether any law prohibited such a contract provision shortening the limitations period (similar laws exist in other states such as Florida, Alabama, and Texas); (2) whether other defenses existed, such as fraud, duress, or misrepresentation; and (3) whether the provision was reasonable. With respect to this last inquiry into “reasonableness,” the appeals court strongly suggested that “one-way” provisions that do not apply equally to both parties to the contract may not be “reasonable.”

Construction professionals should thoroughly review their construction contracts and pay particular attention to whether the contract attempts to change—and especially shorten—any applicable limitations period. A call to your construction lawyer will provide answers to questions that are best asked before, not after, you sign the contract.