Contractor’s delay in bringing legal action proves very costly
May owners and general contractors agree to shorten New York’s legal time period for bringing legal action to recover contract damages? Yes. And if that time period runs from the date of “construction completion” but a formal notice of completion is never issued, will a contractor be barred from suing under the contract if legal action is brought after the limitations period in the contract? Yes.
New York State has a six-year statute of limitations for bringing contract actions. However, parties may contractually shorten the limitations period to a date considered “fair and reasonable.” In Stonewell Contracting Corp. v. Long Island Rail Road Company, __ NYS3d __, 2020 WL 4642852 (1st Dep’t 2020), a general contractor with a $28 million contract with the Long Island Railroad Company agreed that any legal action against the LIRR must be brought within ninety days of “construction completion.” The completion date was extended for two years due to change orders and modifications, but no formal certification or notice of construction completion was ever issued. One and one-half years after the contractor allegedly completed its work, the contractor commenced an action against the LIRR for delay damages.
The Court dismissed the complaint, holding that the lack of a certificate of construction completion did not excuse the contractor’s delay in bringing the action. The contract required legal action to be taken within a certain time period after completion of the work, and that completion date could be measured by the circumstances at hand, such as the cessation of labor, removal of equipment and material, or in this case, the contractor’s issuance of a “Request for Equitable Adjustment” to recoup delay damages.
It is likely that the contract provided that the LIRR would issue a written “notice of completion” acknowledging completion of the work after the contractor requested payment. The contractor may have assumed that the period to bring an action was never triggered because no such written notice was ever issued. That assumption proved misplaced and costly. Because the contractor brought its claim after the expiration of the statute of limitations, the Court never had to decide whether the contractor would be entitled to damages at all.
For more information, contact:
Jacob E. Amir