Under New York’s Statute of Limitations, an action for breach of contract must be commenced within six years after the claim has accrued. No claim can be asserted beyond that six year period, but parties, by agreement, may provide for a much shorter period within which to start suit for breach of contract. An agreement to shorten the limitations period will be enforced provided the shortened period is reasonable. For example, a time period of 14 days has been held unreasonably short and therefore unenforceable.
In Mulvihill Electrical Contracting Corp. v. NAB Construction Corporation, the contractor argued that the subcontractor’s breach of contract claim was time barred because it was not brought within the six month contractual limitations period within which an action must be commenced.
NAB Construction Corporation entered into an agreement with Metro North Commuter Railroad for the rehabilitation of the Park Avenue Viaduct. In January 1994, NAB entered into a subcontract with Mulvihill Electrical Contracting Corp. to perform electrical work at the project. A dispute over payment arose, with the subcontractor claiming that $722,135 remained due to it. On July 12, 2004 Mulvihill sued the contractor, seeking to recover the unpaid balance.
The subcontract stated that no action or proceeding may be commenced by the subcontractor for breach of contract or any other claim arising out of the contract, unless such action or proceeding is commenced within six months of the earlier of the contractor’s or the owner’s acceptance of the subcontractor’s work as complete or the issuance of a certificate of occupancy.
Based on this provision, NAB moved to dismiss Mulvihill’s claim. According to NAB, the owner accepted Mulvihill’s work as complete on September 28, 2001, the acceptance triggered the provisions of the subcontract regarding the six month period to commence an action, and the limitation period expired on March 28, 2002. Accordingly, the contractor argued that the subcontractor’s lawsuit, commenced on July 12, 2004, was untimely and must be dismissed.
The subcontractor argued that the contractor was never paid in full for the subcontractor’s work, thereby showing that the work was never accepted as complete by the owner. Mulvihill also noted that no certificate of occupancy was ever issued. Since NAB could not show that the owner accepted Mulvihill’s work as complete, or that a certificate of occupancy was issued, the subcontractor argued that NAB’s motion to dismiss should be denied.
The court ruled in favor of the contractor, dismissing the subcontractor’s claim. The court acknowledged that NAB did not show that it received full payment from the owner. However, the court relied heavily on a memorandum prepared by the owner’s construction manager. The memorandum stated, “as of September 28, 2001, NAB Construction Corporation satisfactorily completed all outstanding items on the punch list, and submitted all deliverables to the Railroad.” The court also relied on the owner’s construction manager’s deposition testimony, which noted that no certificate of occupancy had been issued because certificates of occupancy are not issued in connection with a project of this type. Consequently, the court found that the owner accepted NAB’s work as having been completed as of September 28, 2001. Since six months from the date of acceptance was March 28, 2002, and the action was not commenced until July 12, 2004, the court held that the subcontractor’s action was time barred under the six month contractual limitations period. Accordingly, the court ruled that the subcontractor’s lawsuit was untimely and granted NAB’s motion to dismiss Mulvihill’s claim.
Courts will strictly construe time limitations periods that are voluntarily agreed to by the parties. This means that before even considering the merits of a claim, courts will dismiss a breach of contract claim if the claimant failed to comply with a shortened contractual limitations period. Courts will not rewrite or change the terms of an agreement that was freely entered into between the parties. The unpaid claimant, or potential claimant, should make every effort to become thoroughly familiar with their contractual limitation period. A claim will be lost if a shortened limitations period is not complied with.
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