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Limiting time to commence action in contract
/ Webinar today 

May 7, 2019
Free Webinar - starts today.  Register now for today's presentation
Topic: Negotiating terms in Dealer Agreement with your central station 
When: May 7, 2019
Time: 12 PM to 1 PM New York time 
Presented by: Ken Kirschenbaum,Esq 
Who should attend: dealers and central stations 
Sign up here:
Limiting time to commence action in contract
            A provision that requires a lawsuit to be commenced within one year of the accrual of the cause of action is fairly common.  The provision would read: “Any action arising out of this agreement or the relationship of the parties must be commenced within one year of the accrual of the cause of action.”
            The purpose of the provision is to require that any lawsuit against the alarm company be commenced within a time period when records and witnesses are still available; events fresh in everyone’s mind.  The focus of inquiry regarding this provision has been its enforceability in any particular jurisdiction.  Challenges to the provision raise issues of conscionability and those challenges often present fact scenarios that appeal to a judge’s sympathy rather than the law.  For example, a serious personal injury occurs and the subscriber fails to commence any action within the limited time period.  When the defending alarm company claims that the lawsuit is untimely the claimant-subscriber has multiple reasons why the limited time period should not be enforced, either as a matter of public policy, or in that specific case.
            Almost all jurisdictions permit contractual provisions limiting the time to commence a lawsuit.  Keep in mind that the law in all jurisdictions does have time limits for commencing actions, all actions.  So the concept is not novel.  It’s the deviation from the statutory framework that is in issue.  Courts generally accept the shortened time period [unless there is a specific statute that prohibits a time limiting provision], provided the shortened period meets the test of reasonableness.  Of course what is reasonable is too often what the judge thinks is reasonable, which begs the question.  Generally, if the reduced time is at least one year it’s likely to be accepted and enforced.  If you see less than one year there better be a very good argument to support that reduced time.
            The time also needs to run from the date of the incident, or in legal terms, the accrual of the action.  Some genius draftsman put in that the lawsuit must be commenced within one year of the date of the contract.  Then, when the actual loss, incident and accrual of the action takes place beyond the one year of the contract date these same geniuses claim the lawsuit is untimely.  There’s probably no good argument to support that position as it clearly makes no sense.
            Something else to keep in mind, and actually the impetus for this article.  K&K received a collection case from one of our client, a Concierge Client as a matter of fact.  The work-up from the client showed a $7000 case against the subscriber.  The subscriber’s contract term ran out in 2013 and went month to month.  The subscriber finally stopped paying in 2016.  Our client sends the collection case to us in 2019.  Well, the statute of limitations for breach of contract in New York is 6 years, so no problem.  But the contract also had a provision that stated that all actions by either party had to be commenced within one year.  The contract was not a Standard Form Agreement, but even the Standard Form Agreement provides: “Any action between the parties must be commenced within one year of the accrual of the cause of action or shall be barred.” 
            Any action of course means an action by either party.  We therefore determined that the collection case could not be commenced.  You should be aware of the contract terms and you should not be sitting on your defaulted subscriber contracts.  Lesson of the month.

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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