Understanding your rights under a construction contract is only the beginning. What’s even more important is to understand when and how these rights can be enforced if something goes wrong — and timing is everything.
Typically, the amount of time certain contract claims can be brought is a matter of statute. But that isn’t always the case. A recent Washington Court of Appeals dismissed an owner’s claim for breach of contract because the claim was filed outside the shortened one-year claim period included in the contract between the parties.
Washington breach of contract claims
When it comes to breach of contract claims, every state has what’s referred to as a statute of limitations (SOL) which sets the amount of time a party has to bring such a claim. Under Rev. Code of Wash. §4.16.030, “an action upon a contract in writing, or liability express or implied arising out of a written agreement” must be brought no later than 6 years after the date of the breach.
But what if a construction contract specifically provides a shorter period of time to bring a breach of contract claim? Which time period applies?
According to the Washington Court of Appeals, the contract period will apply, unless the provision is found to be unconscionable.
Limiting a statute of limitations by contract
The case in question: Gregory M. Tadych and R. Sue Tadych v. Noble Ridge Construction, Inc.
Project Snapshot
- Owner(s): Gregory M. Tadych & R. Sue Tadych (Tadychs)
- Contractor: Noble Ridge Construction, Inc. (NRC)
In 2012, NRC and the Tadychs entered into a contract for roughly $480K for the construction of a custom home in Seattle. One section of the contract of particular note was the warranty provision; which reads as follows:
“Warranty… Any claim or cause of action arising under this Agreement, including under this warranty, must be filed in a court of competent jurisdiction within one year (or any longer period stated in any written warranty provided by the Contractor) from the date of the Owner’s first occupancy of the Project or the date of completion as defined above, whichever comes first. Any claim or cause of action not so filed within this period is conclusively considered waived.”
Note: completion was defined in the contract as the date they received final inspection sign-off by the City of Seattle.
Owner files breach of contract claim within the statute of limitations but outside of the contract claim period
As the project was nearing completion, the parties did a walk-through to put together a punch list for NRC to complete. At this point, the Tadychs had identified rainwater pooling at the bottom of the stairwell, as well as numerous “nicks and cracks on the stucco exterior walls. The rainwater issue was presumably addressed by NRC, but there was no indication any further work was performed on the exterior walls.
In April of 2014, the Tadychs moved into the home, which received its final inspection and approval about two weeks later. Fast forward less than one year, and the Tadychs noticed a “shift” in the home. So the Tadychs hired Construction Dispute Resolution, Inc. (CDR) to review NRC’s work; which raised concerns about the adequacy of the home’s construction and identified numerous deviations from the architect’s plans and building codes. The CDR report was forwarded to NRC who maintained that all the plans and requirements had been met and rejected any liability.
Ultimately, the Tadychs filed a breach of contract lawsuit against NRC in August of 2017. At trial, NRC filed a motion for summary judgment claiming that the lawsuit was time-barred under the one-year contractual claim period; which was granted.
As a result, NRC was the prevailing party and awarded over $150,000 in attorney fees and costs pursuant to the contract. The Tadychs appealed.
One-year claim periods was not considered unconscionable
Tadych’s didn’t dispute that they agreed to the one-year claim period — rather, they argued that the one-year period was substantively unconscionable because they couldn’t have discovered the latent defects in their home within that time period.
In order for a clause to be considered substantively unconscionable, it must be “onesided or overly harsh,” “shocking to the conscience,” “monstrously harsh,” or “exceedingly calloused.”
Furthermore, Washington courts have generally recognized that parties can contractually agree to shorten a statute of limitations period if it allows a reasonable amount of time to discover, investigate, and pursue the claim.
However, the Tadychs’ argument failed. According to Tadychs’ testimony, they became aware (or at least put on notice) of the alleged defects at least one month prior to the contractual claim period.
Thus, the court concluded that:
“…the one-year claim period to which the Tadychs agreed is valid and enforceable. It is neither substantively unconscionable nor unreasonable because they had time to investigate their breach of contract claim and their claim accured before the one-year period expired.”
Accordingly, the Tadychs’ claims were dismissed — and to make matters worse, NRC was also awarded attorney fees and costs for the appeal!
Keep an eye out for contractual claim periods
As we’ve said many times before at Levelset, read your contracts carefully! Whether you are a property owner or a contractor, your rights and claim periods under that contract will be likely be dictated by the terms therein.
Knowing your states’ statute of limitations periods is only part of the battle, you may have less time according to your contract. As long as it’s not unconscionable.
Also: Think about the words used to describe “unconscionable” (shocking to the conscience, monstrously harsh) — that’s a fairly high bar, and courts will be hard-pressed to declare a provision unconscionable. So it’s always better to err on the side of caution.
If you feel like you have a valid claim under your contract, act quickly, you don’t want to lose your rights on a technicality.
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