Residential construction is a challenging venture requiring careful planning and forethought. Years of hard work and millions of dollars are often at stake.
To minimize the risk of lawsuits, some builders have tried including contract provisions, saying a buyer must file any lawsuit alleging construction defects within one year of the home’s completion, rather than within the normal six-year period provided under Washington statutes.
However, a court recently found that contract provision unenforceable in a decision that highlights the importance of careful contract drafting.
In 2014, a buyer signed a purchase agreement for a new home that included a provision stating that the buyer had one year to file any lawsuit alleging construction defect.
After discovering alleged defects, the buyers filed suit 3 years after the home’s completion. The builder moved to dismiss the lawsuit, citing the one-year timeframe in the contract.
The Washington Supreme Court ruled that the contract provision limiting lawsuits to one year was unenforceable.
Under contract law, a provision that is “unconscionable”—meaning extremely unfair to either party—is not enforceable. And the court found the one-year lawsuit limit unconscionable.
Among other reasons, the court said the time period was extremely short and the contract provision was buried in a 14-page contract, suggesting the buyers were unaware of the term that significantly impacted their rights.
The case illustrates the importance of careful contract drafting.
An experienced construction attorney can assist in drafting a contract that avoids issues that may render them unenforceable in part. There can be any number of other contract issues that can create problems for builders or lead to greater legal risk, and advice from a knowledgeable attorney is critically important.