Court of Appeals Affirms Dismissal of Owner’s Claims Based on Contractual One-Year Claims Limitations Period

Cassidy Ingram | Ahlers Cressman & Sleight

In a recent unpublished decision – Tadych v. Noble Ridge Construction, Inc.– the Washington State Court of Appeals, Division One, held that a one-year contractual claim limitations clause was valid and enforceable. The Tadych decision is important because it reiterates the strict approach courts will take to a claim limitations clause less than the statutory six years for breach of contract claims prescribed by RCW 4.16.040(1). In other words, when the parties agree to shorten the limitations period, the agreement will be enforced barring any procedural or substantive unconscionability.

In Tadych, plaintiff owners (the Tadychs) contracted with defendant contractor (Noble Ridge Construction, Inc., or NRC) for the construction of a custom home in 2012. The contract provided a one-year claim limitations clause in which claims could be raised, and that all claims not raised in the one-year period would be waived. In December 2013, as the project neared completion, the Tadychs met with NRC to identify any outstanding project issues. The Tadychs noted several, including rainwater pools at the landing at the bottom of the stairs and several nicks and cracks on the stucco exterior walls.

The Tadychs moved into the home on April 8, 2014, and the City of Seattle Department of Planning and Development conducted its final site inspection on April 15 and approved the residence for occupancy on April 23. In January or February 2015, the Tadychs began to notice a shift in their home. In February of 2015, the Tadychs engaged Construction Dispute Resolution (CDR)  to review NRC’s work. CDR raised concerns about the adequacy of the home’s construction and prepared a written report in March 2015 indicating several deviations from the architectural plans and building codes. The Tadychs sent this report to NRC, who assured the Tadychs that NRC’s work followed all requirements and rejected any claims that there were deviations from the plans. The Tadychs continued to notice issues with the home through October 2016.

In August 2017, the Tadychs filed a breach of contract action against NRC, arguing that the one-year claim limitations clause was substantively unconscionable because they could not have discovered the latent defects within that time or, alternatively, that NRC should be estopped from asserting it. NRC moved for summary judgment, arguing that the Tadychs’ lawsuit was time-barred under the one-year contractual claim period. The trial court granted summary judgment in favor of NRC and the Court of Appeals affirmed. The Court held that the claims limitation clause was not substantively unconscionable because (1) the Tadychs were not seeking to vindicate statutory rights but private contract rights, (2) the one-year claim period was sufficiently long, and (3) the claims period did not require the Tadychs to forego other statutory rights to which they were otherwise entitled. In addition, the Court held that the Tadychs were on notice of each potential latent defect before the one-year period ended, and they could have preserved their claims by initiating the action within that time.

The Court also rejected Tadychs’ claim that NRC should be estopped from relying on the one-year claim period because it misrepresented its intention to repair them. The Court held that NRC did not make any statements that could have induced the Tadychs to refrain from bringing a timely lawsuit. NRC’s mere denial of any defects was not a misrepresentation to the level of justifying estoppel.

Commentary

This opinion reiterates the importance of pursuing claims within the contracted-for period if one is provided. Courts are hesitant to find a contractual claim limitations clause unconscionable. Therefore, the best course of action for an owner is to raise latent defects in a lawsuit as soon as they are discovered.