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contract provision shortening the statute of limitations September 14, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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contract provision shortening the statute of limitations
September 14, 2017
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contract provision shortening the statute of limitations
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    Most alarm contracts, including the Standard From Agreements, have a provision in the contract that shortens the statute of limitations.  Generally, the provision is enforceable, provided it is fair and provides an adequate amount of time to commence an action.  The statute of limitations is a statutory time limit within which a lawsuit can be commenced.  A lawsuit will have a "complaint" and the complaint will plead causes of action, of which there are many.  In alarm cases we typically see causes of action for breach of contract and negligence.  Statute of limitations is set by state law and typically the statute of limitations for breach of contract is 6 years and negligence is 3 years.  Your state can have different time periods.  
    What shortened period is generally deemed acceptable?  One year.  But keep in mind that it's one year from the accrual of the cause of action.  I recall one case where the contract provided that the one year started to run from the date of the contract.  More than a year after the contract was signed there was a loss.      The idiot company tried taking the position that the one year shortened period actually ran before there was a loss; i.e. before the cause of action accrued.  Obviously it wasn't enforced [and can't recall the case so don't ask].
    One year seems kind of short, especially when you consider that breach of contract has a 6 year statute of limitations [in New York].  In a recently decided case here in New York a subcontractor sued the contractor for $50K, more than one year after the work was completed, and after the contractual provision shortening the statute of limitations to one year.  The subcontractor claimed the one year provision was in a contract of adhesion and unconscionable.  The subcontractor also claimed that even if the cause of action for breach of contract was dismissed the court should allow recovery under a theory of "quantum meruit" which the subcontractor argued was not subject to the one year contract provision.  The judge found that you cannot have a quantum meruit cause of action when you have a an express contract governing the subject matter involved.  The judge also enforced the one year provision and dismissed the action. [R&B Design Concepts v Wenger Construction.   Supreme CT/ Nassau Co/ 601650/2015].
    Shortening the statute of limitations in alarm contracts is particularly important because another contract provision in the Standard Form Agreements provides that the only cause of action a subscriber can have is for breach of the contract [though most sue for negligence] so the statute of limitation could be for 6 years.          That's a long time to wait to get sued.  Records get lost, witnesses disappear and memory fades.  If the loss is big enough it will be sitting over you like a rain cloud for 6 years.  
     There isn't magic in one year, but it's fairly common.  I would not make it less, and there doesn't appear to be any reason to make it more.  Make sure it commences with the accrual of the cause of action.  
    You should check with your state law because it may not permit shortening the statute or it may require some specific form of notice in either font size or color.  We try and consider that when we provide our customization of the Standard Form Agreements for your state.  
    One final word on this.  A lawyer can find ways to screw this simple provision up.  Yes I've seen it.  I'm sitting here trying to remember the stupid provisions I've seen; sorry can't recall.  Go read your contract [if I didn't write it] and see if it makes crystal clear sense to you.  If not, here is where you get your contracts:  www.alarmcontracts.com
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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