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Can you shorten the statute of limitations in your alarm contract August 11, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Can you shorten the statute of limitations in your alarm contract
August 11, 2017
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Can you shorten the statute of limitations in your alarm contract  
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    All claims [causes of action] have specified time periods by which the lawsuit must be commenced or the claim deemed abandoned and barred.  The time period is called the Statute of Limitation and typically the time period is 6 years for contract, 4 years for warranty, 3 years for negligence, 1 year from intention tort.           But these time constraints vary state to state.    Alarm contracts typically shorten the time to bring an action against the alarm company and the shortened time is typically 1 year.  So the question is, can you include a provision shortening the time to bring a lawsuit?  Will that provision turn out to be unenforceable?       Will that provision subject you to a potential claim for deceptive business practices, potentially making you a class action defendant target?
    General rules of contract apply with some exception.  Parties are free to contract as they wish provided the contract is not unconscionable [which is really a legal conclusion and not some subjective analysis], does not violate a public policy [which would make it unconscionable I suppose] or violate a statute prohibiting the shortening of the statute of limitations.  
    When we provide our Standard Form Agreements we do try to customize the contract provisions state by state.  
    If there isn't a statute to worry about, your focus will be whether the shortened period is reasonable.  One year is fairly consistently enforced.  But be mindful that the year needs to start when the claim arises, not when the contract is signed.  If the period runs from contract signing the period could expire before the claim even arises; the provision won't be enforced.  
    I recently made a change in the Standard Form Agreement to make the shortened time period more acceptable.  I made it reciprocal.  Now not only will the subscriber have 1 year to bring an action but the alarm company will also have the same 1 year.  Making the provision reciprocal, in my opinion, makes it seem fairer on its face.  If you let a subscriber go a year without paying then you deserve to have your claim barred.  
    An appellate court case in Maryland just released a decision addressing the issue.  See below for excerpts from the case. The case is Court of Appeals of Maryland. Richard and Daphne CECCONE
v. CARROLL HOME SERVICES, LLC.
    "States have taken different approaches as to whether, and the extent to which, parties to a contract may agree in advance to shorten a statutory limitations period. Among the states that prohibit such provisions, some have enacted laws containing such a prohibition,12 while others have imposed that prohibition judicially on the basis of public policy.13 In other states, courts appear to allow for contractually-shortened limitations periods, absent a defense to contract formation.14 Many courts have assessed such provisions according to a criterion of reasonableness.15 In any event, it seems safe to say that “where a limitations period is imposed by a contract rather than by a statute, the public policy considerations that typically weigh in favor of strict enforcement of the limitations period do not apply.”16
 
*6 9Maryland law has combined these approaches. There are some provisions in the Maryland Code that explicitly bar any effort to shorten a statute of limitations. See, e.g., Maryland Code, Insurance Article (“IN”), § 12–104 (provision in insurance or surety contract that purports to shorten period of limitations is “against State public policy, illegal, and void”);17 see also St. Paul Travelers v. Millstone, 412 Md. 424, 987 A.2d 116 (2010) (applying IN § 12–104 to hold a contractually-shortened limitations period void). Otherwise, the validity of a contractual provision that purports to shorten a statutory limitations period is measured by its reasonableness and by whether certain defenses to contract formation can be established. The Court of Special Appeals aptly summarized the Maryland approach: “[P]arties may agree to a provision that modifies the limitations result that would otherwise pertain provided (1) there is no controlling statute to the contrary, (2) it is reasonable, and (3) it is not subject to other defenses such as fraud, duress, or misrepresentation.” College of Notre Dame of Maryland, Inc. v. Morabito Consultants, Inc., 132 Md.App. 158, 174, 752 A.2d 265 (2000).
 
Milton Co. v. Council of Unit Owners of Bentley Place Condominium, 354 Md. 264, 274–76, 729 A.2d 981 (1999).
12
See, e.g., Code of Alabama, § 6–2–15 (holding such agreements “void”); Florida Statutes § 95.03 (same); cf. Texas Statutes, Civil Practice and Remedies Code, § 16.070 (same, unless the contract “relat[es] to the sale or purchase of a business entity” where there is an exchange of consideration and the contract is worth at least $500,000).
13
Dunlop Tire & Rubber Corp. v. Ryan, 171 Neb. 820, 108 N.W.2d 84 (1961) (holding such agreements void as “against public policy”).
14
Rory v. Continental Ins. Co., 473 Mich. 457, 703 N.W.2d 23, 31 (2005) (“[A]n unambiguous contractual provision providing for a shortened period of limitations is to be enforced as written ... A mere judicial assessment of ‘reasonableness' is an invalid basis upon which to refuse to enforce contractual provisions.”)
15
See, e.g., Order of United Commercial Travelers of America v. Wolfe, 331 U.S. 586, 608, 67 S.Ct. 1355, 91 L.Ed. 1687 (1947) (“in the absence of a controlling statute to the contrary, a provision in a contract may validly limit ... the time for bringing an action ... to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period”); Nuhome Investments, LLC v. Weller, 81 P.3d 940, 947 (Wy. 2003) (contractually-shortened limitations periods “are prima facie valid and will be enforced absent a demonstration by the party opposing enforcement that the clause is unreasonable ...”);
16
Gallegos v. Mount Sinai Medical Center, 210 F.3d 803, 810 (7th Cir. 2000).
17
IN § 12–104 was enacted in reaction to a decision of this Court enforcing a provision in an automobile insurance contract shortening the period of limitations. See Amalgamated Cas. Ins. Co. v. Helms, 239 Md. 529, 540, 212 A.2d 311 (1965); Chapter 487, Laws of Maryland 1966; see also Harvey v. Northern Ins. Co. of New York, 153 Md.App. 436, 837 A.2d 223 (2003) (holding that IN § 12–104 did not apply to a marine insurance policy).
18
Barrie School v. Patch, 401 Md. 497, 933 A.2d 382 (2007) (liquidated damages clauses upheld if the stipulated amount is a “reasonable forecast of just compensation”).
19
Gilman v. Wheat, First Securities, Inc., 345 Md. 361, 378, 692 A.2d 454 (1997) (forum selection clauses would be upheld unless “enforcement would be unreasonable”).
20
National Glass, Inc. v. J.C. Penney Properties, Inc., 336 Md. 606, 610, 650 A.2d 246 (1994) (choice-of-law provisions upheld unless, among other things, “there is no ... reasonable basis for the parties' choice”) (citing Restatement (Second) Conflict of Laws § 187(2) (1971)).
21
See, e.g., Henning Nelson Const. Co. v. Fireman's Fund American Life Ins. Co., 383 N.W.2d 645, 651 (Minn. 1986) (holding that a one year contractual limitations period was “unreasonably short”). But see, e.g., Capitol Fixture & Supply Co. v. National Fire Ins. Co. of Hartford, 131 Colo. 64, 279 P.2d 435, 437 (1955) (holding that a one year contractual limitations period was “not unreasonable”).
22
Compare International Business Machines Corp. v. Catamore Enterprises, Inc., 548 F.2d 1065, 1073 (5th Cir. 1976) (upholding contractually-shortened limitations period contained in a “facially comprehensive written agreement[ ] between sophisticated corporate entities”) with Long v. Holland America Line Westours, Inc., 26 P.3d 430, 435 (Alaska 2001) (refusing to enforce a contractually-shortened limitations period because, inter alia, one party “possessed disproportionate bargaining power in setting the terms of the tour contract”); McKee v. AT & T Corp., 191 P.3d 845, 859 (Wash. 2008) (refusing to enforce such contractually shortened limitations provision “when imposed on a consumer in a contract of adhesion for a basic consumer service”)."
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com