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Contract specifying one year suit period upheld by court

D&S Restoration v. Wenger Construction Co, 2016 WL 6273834, (Sup. Ct.)

The Statute of Limitations law in New York (C.P.L.R. §201) allows six years for a claim to be brought after a cause of action occurs. An exception to this rule is if the parties agree to a shorter period of time by written contract. In D&S Restoration v. Wenger Construction Co, the parties entered into a contract which reduced the time D&S Restoration (“Plaintiff”) could bring a cause of action against Wenger (“Defendant”) to just one year after substantial completion of the work.

Plaintiff was contracted to perform asbestos abatement at a public school on Staten Island. The parties agreed that the work was completed in December 2012. However, Plaintiff waited until final negotiations were completed in June 2016 to file its Complaint. Plaintiff argued that its suit should be allowed due to impossibility of performance, equitable estoppel and/or unjust enrichment.

Impossibility is shown only if the subject matter of the contract is destroyed or if an unforeseeable and unanticipated event occurred which makes enforcement of the contract impossible. See Kel Kim Corp. v. Cent. Markets, Inc., 70 N.Y.2d 900 (1987). The trial court reasoned that it was foreseeable by Plaintiff that final negotiations could take longer than one year after substantial completion in a public contract. Therefore, Plaintiff’s claim of impossibility was denied by the court because it was not unforeseeable or unanticipated that final negotiations could take longer than one year.

Plaintiff next argued equitable estoppel as grounds to deny Defendant from asserting the one year limitations clause. Equitable estoppel can be used by a party if it can show (1) false representation or concealment, (2) intention that the false representation will be acted upon, and (3) the party to be estopped had knowledge of the facts. Airco Alloys Div. v. Niagara Mohawk Power Corp., 430 N.Y.S.2d 179. The court found no false representation or concealment by Defendant of any facts, and therefore ruled equitable estoppel not applicable to this case.

Plaintiff’s argument of unjust enrichment was also rejected by the court. While New York law does allow for claims under unjust enrichment (see, e.g., Georgia Malone & Co., Inc. v. Rieder, 19 N.Y.3d 511, 516 (2012)), the time period for Plaintiff to assert such a claim was limited to one year.

Finally, Plaintiff asserted that a separate agreement or new contract was created during the exchange of emails that occurred between the parties during negotiations. The court ruled these credit negotiations were part of the original contract. Furthermore, the parties agreed no oral modifications to the contract could be made. The court cited General Obligations Law §15-301, which states any changes to a written contract must also be in writing and signed.

Result: Plaintiff was contractually limited to pursue damages to one year, and did not show sufficient evidence of impossibility, equitable estoppel or unjust enrichment to persuade the court to allow Plaintiff’s case to be heard on its merits.

Is this result harsh? Yes. The Plaintiff may very well have had a legitimate claim. However, was the Plaintiff aware of the short suit period in the contract? Probably not. Any good construction attorney would advise a client not to accept these terms, and would get the suit filed on time if brought in early enough. The bottom line is: have a knowledgeable attorney review your construction contracts. And if things go sour, as they sometimes will, get your attorney involved sooner rather than later. You’ll be glad you did.