Article written by J. Kent Holland, Jr. and Joanne Dekker
Public School District sued Contractor for alleged defective construction of a school after flooding caused extensive damage to the school. About one year later, School District added Architect for defective design. School District and Contractor settled their dispute leaving Architect as the only defendant. Architect sought dismissal of the case on the grounds that the time limits for bringing suit under Colorado Construction Defect Action Reform Act (“CDARA”) barred the School District’s suit. School District argued that the contract language provided for a longer time period that covered the filing of its lawsuit against Architect.
In arriving at its decision, the trial court determined that the plain language of the CDARA did not prevent the parties from modifying the accrual period for bringing suit for defective services. The appellate court agreed and determined that allowing the parties to agree to a longer time period did not violate public policy considerations such as encouraging timely dispute resolution, decreasing litigation and reducing the costs of insurance for design professionals. South Conejos School District RE-10 v. Wold Architects Incorporated, 2023 WL 6152563, 2023 COA 85, ___ P.3d ____ (2023).
The contract language in question provided the following:
Unless a longer period is provided by law, any action against [Wold] brought to recover damages for deficiency in the design, planning, supervision, inspection, construction or observation of construction or for injury to person or property shall be brought within two years after the claim for relief arises and is discovered by [the District]; … “Discovered” as used herein means detection and knowledge by [the District] of the defect in the improvement that ultimately causes the injury, when such defect is of a substantial or significant nature.
In contrast, the CDARA statute provides the following:
A “claim for relief arises … at the time the claimant … discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury.”
The Architect argued that the district court erred by accepting the accrual provision in the contract rather than CDARA’s accrual provision. The Architect reasoned that the accrual provision in section 6.17.1 of the contract is void as against public policy because it violates the policies underlying statutes of limitation generally and the CDARA accrual provision more specifically.
The appellate court concluded that nothing in the CDARA stated that a different accrual time is invalid. “If a statute of limitations can be waived or shortened, … it is difficult to see why, absent a contrary legislative direction, it cannot be extended.”
In reaching its conclusions in this specific case, the court explained how important it deemed the right of parties to have their contractual terms enforced. It quoted from an earlier decision that, “[T]he right of private contract is no small part of the liberty of the citizen, and … the usual and most important function of courts of justice is rather to maintain and enforce contracts, than to enable parties thereto to escape from their obligation”)…. [The Architect] and the District are sophisticated parties that, by contract, sought to allocate business risks in advance…. [Noting the trend in Colorado and elsewhere to protect the ability of the parties to negotiate the allocation of risk and reward associated with a construction project, we see no reason to disturb that risk allocation.”
Comment: When negotiating contracts design professionals often revise the dispute resolution procedures to shorten the time period for suits to be filed. The contract in this case is unique in that instead of shortening the time period, it extended it. The court enforced the contract as negotiated – applying the “freedom of contract” principles. It is important for all parties not to hope for a court to fix their poor contract to make it more reasonable than what the parties negotiated.
About the author: Article written by J. Kent Holland, Jr. and Joanne Dekker. This article is published in ConstructionRisk Report, Vol. 26, No. 3 (March 2024).
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