Not So Fast: Washington Court Finds the One-Year Limitations Period in a Residential Construction Contract Is Unenforceable


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In Tadych v. Noble Ridge Constr., Inc., No. 100049-9, 2022 Wash. LEXIS 545, the Supreme Court of Washington (Supreme Court) considered whether the lower court erred in enforcing a one-year accelerated limitations period clause in a construction contract. The Supreme Court considered the extent to which the provision hindered the plaintiffs’ statutory rights – as set forth in Wash. Rev. Code § 4.16.310 – which provides homeowners with a six-year repose period for construction defect claims.  The court found that the contractual provision’s shortening of the time period from six years to one year was a gross deprivation of the plaintiffs’ statutory rights and was unfairly one-sided in favor of the defendant.  As such, the court held that the provision was substantively unconscionable and, thus, unenforceable.

The plaintiffs, Gregory and Sue Tadych, hired the defendant, Noble Ridge Construction, Inc. (Noble Ridge), to build a custom home.  Noble Ridge provided its standard contract, which included a warranty provision.  The provision stated that “any claim or cause of action arising under this Agreement, including under this warranty, must be filed in a court of competent jurisdiction within one year (or any longer period stated in any written warranty provided by the Contractor) from the date of Owner’s first occupancy of the Project or the date of completion. . . .”  The provision also stated that “any claim or cause of action not so filed within this period [was] conclusively considered waived.”

The plaintiffs occupied their new home in April 2014.  In April 2017, the plaintiffs hired construction experts who confirmed several construction defects in the home, including poor structural ventilation, water intrusion and code violations.  Shortly thereafter, roughly three years after the plaintiffs first occupied the home, they sued Noble Ridge.  Noble Ridge filed a motion for summary judgment based on the one-year limitations period in the contract.  The trial court agreed that the one-year limitation period in the contract barred the plaintiffs’ claims and dismissed the case.  The Court of Appeals for the State of Washington (Court of Appeals) affirmed.

As noted by the Supreme Court, the question of whether a contract is unconscionable is a question of law to be reviewed de novo.  Washington recognizes two categories of unconscionability: substantive or procedural, either one of which is sufficient to void a contract.    The court defined substantive unconscionability simply as “unfairness of the terms or results,” and focused its analysis on the effect the contractual provision had on existing statutory rights available to the plaintiffs.

Discussing Wash. Rev. Code § 4.16.310, the court noted that it provides homeowners a six-year statute of repose period to seek damages for construction defects, which begins to run at substantial completion or termination of construction services.  The court also noted that the public policy underlying the statute is to allow sufficient time to investigate a claim while protecting against defending stale claims.  The legislature balanced these two possible harms when it established the six-year statutory repose period.  Thus, the court found that the one-year limitations provision effectively abolished the plaintiffs’ statutory rights under § 4.16.310.  As stated by the court, the shortening of the limitations period from six years to one year was one-sided in favor of the defendant that the provision was unconscionable, and thus enforceable. Since the plaintiffs’ lawsuit was timely under the statute, the court reversed the Court of Appeal’s decision and reinstated the plaintiffs’ case.

The Noble Ridge case reminds us that Washington provides protections against unconscionable contract provisions, particularly those that significantly hinder a claimant’s statutory rights.  As such, subrogation professionals practicing in Washington should consider this decision when reviewing accelerated limitation provisions as there may be legitimate challenges to substantively unfair terms.

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Consumer Product Safety Commission Recall


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In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control.  On November 17, 2022, the CPSC announced the following recall related to a product that presents a fire hazard:

Polaris Industries Recalls MATRYX, AXYS and Pro-Ride Snowmobiles Due to Fire Hazard (Recall Alert)

According to the CPSC’s website, “electrostatic discharge inside the fuel tank can cause vapors to ignite during operation and the tank to burst, posing a fire hazard.”

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Gavel

Too Costly to Be Fair: Texas Appellate Court Finds the Arbitration Clause in a Residential Construction Contract Unenforceable


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In Cont’l Homes of Tex., L.P. v. Perez, No. 04-21-00396-CV, 2022 Tex. App. LEXIS 7691, the Court of Appeals of Texas (Appellate Court) considered whether the lower court erred in refusing to enforce an arbitration clause in a construction contract between the parties. The Appellate Court considered the costs of the arbitration forum required by the contract in the context of the plaintiffs’ monthly household income. The court also compared the arbitration cost to the estimated cost of litigating the dispute. The court held that the arbitration clause was substantively unconscionable on the grounds that the arbitration costs were not affordable for the plaintiffs and not an “adequate and accessible substitute to litigation.”  The Appellate Court affirmed the lower court’s decision denying the defendant’s motion to compel arbitration. Continue reading

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Product Recall

Consumer Product Safety Commission Recalls


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In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. Recently, the CPSC announced the following recalls related to products that present fire hazards:

  1. LG Energy Solution Michigan Recalls Home Energy Storage Batteries Due to Fire Hazard (Recall Alert). According to the CPSC’s website, “[t]he home solar panel batteries can overheat, posing a risk of fire and emission of harmful smoke.”
  2. Power Plus Recalls Tora Portable Power Charging Stations Due to Fire and Explosion Hazards. According to the CPSC’s website, “[t]he lithium-ion battery in the recalled portable power charging stations can catch on fire while charging, posing fire and explosion hazards.”
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Gavel

The Final Nail: Ongoing Repairs Do Not Toll the Statute of Repose


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In Venema v. Moser Builders, Inc., 2022 PA Super. 171, 2022 Pa. Super. LEXIS 414, the Superior Court of Pennsylvania (Superior Court) upheld an award of judgment on the pleadings from the Court of Common Pleas of Chester County (Trial Court). The Superior Court found that Pennsylvania’s 12-year Statute of Repose for improvements to real property (Statute of Repose) began to run upon the issuance of the certificate of occupancy following original construction of the home in 2003—not from the completion of repairs to the home that continued through 2008. Continue reading

This entry was posted in Construction Defects, Pennsylvania, Statute of Limitations-Repose and tagged , , , .
Community Buildings

Public Policy Prevails: Homebuilders and Homebuyers Cannot Agree to Disclaim Implied Warranty of Habitability in Arizona


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In Zambrano v. M & RC II LLC, et al., 2022 Ariz. LEXIS 309, the Supreme Court of Arizona held that a homebuilder and homebuyer could not waive or disclaim the implied warranty of workmanship and habitability. While the court would normally enforce a contract between two parties – even if one side made a “bad deal” – they will not do so if the contract’s terms are against public policy. Continue reading

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Recall Alert

Consumer Product Safety Commission Recalls


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In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. On October 20, 2022, the CPSC announced the following recalls related to products that present fire hazards:

  1. Gel Blaster Recalls Gel Blaster SURGE Model 1.0 Toy Guns Due to Fire Hazard. According to the CPSC’s website, “[t]he lithium-ion battery pack inside the handle can overheat and ignite, posing a fire hazard.”
  1. Backyard Nature Products Recalls Birds Choice Acrylic Bird Baths Due to Fire Hazard. According to the CPSC’s website, “[w]hen sunlight goes through the recalled bird bath’s acrylic surfaces onto nearby wooden surfaces, such as siding or decking, the wood surface can overheat, posing a fire hazard.”
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Product Recall

Consumer Product Safety Commission Recalls


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In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. On October 13, 2022, the CPSC announced the following recalls related to products that present fire hazards:

  1. Newair Recalls Magic Chef Air Fryers Due to Fire and Burn Hazards. According to the CPSC’s website, “[t]he air fryer can overheat, posing fire and burn hazards.”
  2. U-Line Recalls Outdoor Freezers Due to Fire Hazard. According to the CPSC’s website, “[t]he outdoor freezers can overheat, posing a fire hazard.”
  3. E-Bikes Recalled Due to Fire, Explosion and Burn Hazards; Distributed by Ancheer. According to the CPSC’s website, “[t]he lithium-ion batteries can ignite, explode or spark, posing fire, explosion and burn hazards to consumers.”
  4. Bombardier Recreational Products (BRP) Recalls Snowmobiles Due to Fire Hazard (Recall Alert). According to the CPSC’s website, “[t]he fuel injector hose retainer screw can loosen and cause a fuel leak, posing a fire hazard.”
This entry was posted in CPSC Recalls, Products Liability and tagged .
Recall Alert

Consumer Product Safety Commission Recalls


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In subrogation cases where the insured’s damages were caused by a defective product, the fact that the product at issue is or was subject to a recall announced by the Consumer Product Safety Commission (CPSC) may help to establish that the product was defective when it left the manufacturer’s possession and control. On October 6, 2022, the CPSC announced the following recalls related to products that present fire hazards:

  1. Target Recalls Tea Kettles Due to Fire and Burn Hazards. According to the CPSC’s website, “[t]he paint can chip on the bottom of the recalled kettles, posing a fire hazard. In addition, the handle can break and/or the spout can leak, posing a risk of burn injuries.”
  1. Katadyn North America Recalls Optimus Gemini Portable Gas Stoves Due to Fire Hazard. According to the CPSC’s website, “[t]he recalled stove’s gas regulator can have a tear in the seal causing a gas leak, posing a fire hazard.”
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