3. Statutes of limitations and repose
Statutes of limitation and repose limit the time in which a design professional can be sued. In many situations, the parties can agree to limit this time by contract. Of course, this would not affect the rights of third parties to sue the design professional. For instance, someone injured as a result of a defect in the design of a building can sue the architect no matter what the contract says—so long as the suit is brought within the applicable statute of limitations or repose.
However, as between the owner and design professional, those parties can agree to shorten the time within which either party can sue the other. Interestingly, the standard documents prepared by the American Institute of Architects (AIA) up until the 2007 versions, contained such a provision. For example, the 1997 version of B151, Abbreviated Standard Form of Agreement Between Owner and Architect, contained this provision:
9.3 Causes of action between the parties to this Agreement pertaining to acts or failures to act shall be deemed to have accrued and the applicable statutes of limitations shall commence to run not later than either the date of Substantial Completion for acts or failures to act occurring prior to Substantial Completion or the date of issuance of the final Certificate for Payment for acts or failures to act occurring after Substantial Completion. In no event shall such statutes of limitations commence to run any later than the date when the Architect’s services are substantially completed.
While this did not shorten the statute of limitations, it affected when that period started—it started upon the date of substantial completion, no matter when the injury occurred or when a defect is discovered. The effect of this was to eliminate the statute of repose.
An example of the effect of this provision is if the roof starts leaking in a building built in Illinois three years after substantial completion. Without the above language, the owner of the building would have four years (i.e. the current Illinois statute of limitations for construction issues) to sue the architect for a design defect that caused the leak. However, if the parties had that 1997 agreement with the above contract language, the owner would have only one year to sue the architect because the statute of limitations had started running three years earlier, leaving only one year remaining on the four year time limit.
The design professional could get even more aggressive with this language by actually shortening the statute of limitations. Here is an example:
The parties agree that no action may be brought by either party more than one year after the earlier of the date of the Architect’s Certificate of Substantial Completion or the date of the Architect’s last substantial work.
Generally, private parties are free to shorten a statute of limitations by contract. (See Order of United Commercial Travelers of America v. Wolfe, 67 S.Ct. 1355 [1947].) Most states would likely uphold the above clause so long as the stated period is not unreasonable. For instance, shortening the period to one ‘week’ would likely fail, but one ‘year’ should work under most circumstances.
Conclusion
Design professionals should consider trying to limit their liability exposure by negotiating a good contract with their client. Of course, the client may push back with provisions that are more favorable to the client. This is where advice from an attorney familiar with the laws of the state where the project is located can be most beneficial.
Werner Sabo, FAIA, FALA, is an architect, attorney, and partner at the Chicago law firm, Sabo & Zahn. He is the author of Legal Guide to AIA Documents, now in its fifth edition, published by Wolters Kluwer. Sabo can be reached at wsabo@sabozahn.com.
Shawn Goodman is an attorney at Sabo & Zahn. He can be reached at sgoodman@sabozahn.com.
