The Attorney’s Column has cautioned contractors of short contractual limitation periods within which to commence a lawsuit. The generally applicable New York statute of limitations provides for a six year time limit to start an action for breach of contract. Contractors, however, should be made aware that a construction contract may provide a much shorter time limitation within which the lawsuit must be commenced. Shortened contractual time periods are often written into construction bond and insurance contracts. The contractual time period will be enforced by the courts, provided the time period is not unreasonably short.
In the recent case of AWI Security & Investigations, Inc. v Whitestone Construction Corp., the court addressed a contractual six month time to sue limitation.
Whitestone entered into four contracts with AWI for security services at school or housing project worksites. All four contracts contained the following provision:
Limitation on Suit:
No claim or action by [plaintiff] arising out of or related to this Agreement shall lie or be maintained against [defendant] unless such action is commenced no later than six (6) months after either (a) the cause of action accrues, (b) the termination or conclusion of this agreement, or (c) the last day [plaintiff] performed any physical work at the Project site, whichever of the proceeding [sic] events shall occur first.
AWI performed its services at the four jobsites through April of 2012. In July of 2014, AWI sued Whitestone, claiming that it was not paid for its services. Whitestone moved to dismiss the action based on the six month contractual time to sue limitation. AWI opposed the motion, arguing that: (1) Whitestone had a continuing obligation under Section 106 of the General Municipal Law to remit to AWI payments that Whitestone received from the City of New York on account of AWI’s work; and (2) Whitestone’s counsel acknowledged in writing, in June of 2012, that the amounts owing to AWI were not then due.
The court granted Whitestone’s motion and dismissed the complaint, finding that the lawsuit was indeed commenced more than six months after the earliest of the first of the three triggering events. In doing so, the court noted that AWI made no challenge to the shortened six month time to sue limitation period as being unreasonably short or the product of overreaching by Whitestone. With no such challenge having been made, the court went on to rule that Section 106 of the General Municipal Law, which requires prompt payment to subcontractors after receipt of payment from public owners, did not effectively extend the contractual limitation period. In a like vein, the court rejected the argument that the June, 2012 letter of acknowledgement from Whitestone’s counsel acted to extend the time limitation period, holding that the written acknowledgement would have had to have been of an existing debt, and the debt was not existing at the time of the acknowledgement.
The courts continue to enforce agreed-upon shortened contractual time to sue limitations. There is little else in the law that can destroy a case so quickly as a short time to sue period. The courts do not have any discretion to extend the short contractual time limitation period, even though there may be good reasons for delay in starting the lawsuit. An unpaid claimant is well advised to become familiar with the contractual time to sue limitation period. A claim will often be lost if the limitation period is not complied with.