Contractual Time Limitations Bar Contractor's Extra Work Claim
Contractors are cautioned of short contractual limitations to start suit for breach of contract, and an even shorter time limitation to serve a notice of claim. The New York statute of limitations provides for a six year period after a claim has accrued within which to commence an action for breach of contract. The courts, however, will enforce a much shorter period if the contract between the parties shortens the limitations period to start suit.
In the recent case of Schindler Elevator Corp. v New York City Housing Authority, the court enforced contractual provisions that required 20 days after a claim has accrued to file a notice of claim and a one year period within which to commence a lawsuit.
On May 13, 2009, the New York City Housing Authority entered into a contract with Schindler Elevator to install elevator zone door locks and to perform associated capital improvements at various Housing Authority housing developments in Manhattan and Queens. The contract required Schindler, prior to making any claim for extra cost or extra compensation under the contract, to provide a notice to the Housing Authority within 20 days after the claim arises. The contract also provided that any lawsuit under the contract had to be brought within one year of its termination. The Housing Authority terminated the contract on June 15, 2010, and it notified Schindler on November 30, 2010 that its extra work claim was denied. Schindler served its notice of claim on July 12, 2011 and started its lawsuit on July 28, 2011.
In response to the lawsuit, the Housing Authority moved to dismiss Schindler's claims based on its failure to serve a notice of claim within 20 days of the denial of the extra work claim, and Schindler's failure to start the lawsuit within one year of the termination of the contract.
The court granted the Housing Authority's motion and found that because the contractual language was clear, and because both parties were sophisticated entities, the two provisions were enforceable as written. In doing so, the court determined that the denial of the extra work claim after the contract had been terminated did not extend the contractual period within which to start the lawsuit and, in any event, there was no dispute that the notice of claim was not served within 20 days as was required by the contract.
The courts will enforce time limitations voluntarily negotiated between the parties. Before they even consider the merits of a claim, courts will make certain that there has been strict compliance with the parties' agreed-upon time limitations period. The unpaid claimant should make every effort to become thoroughly familiar with the time limitations of the contract. The claim will be lost if not brought within the contractual time limitations period.
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