Tadych v. Noble Ridge - Washington Supreme Court Invalidates One-Year Limitation Period in Construction Contract
Wednesday, December 21, 2022
by: Bill Cornell & Mike Slater, Preg O’Donnell & Gillett

Section: Fall 2022

In a recent 5-4 decision, Washington’s Supreme Court held that a one-year limitation period in a construction contract was substantively unconscionable, and therefore, void, and unenforceable. 
In Taydych v. Noble Ridge Construction, plaintiff-homeowners brought defect claims against the general contractor, Noble Ridge Construction.  Prior to the work, the parties executed a construction contract that included a “warranty” provision, which provided in part:
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 as defined above, whichever comes first. Any claim or cause of action not so filed within this period is conclusively considered waived.
Plaintiffs moved into the home in April 2014.  In February 2015, Plaintiffs claimed the home had shifted and they noticed out of level flooring.  Plaintiffs hired a construction expert to evaluate the owner’s claims.  The consultant also identified potential code issues associated with the ventilation system.  Plaintiffs brought these concerns to Noble Ridge within the one-year limitations period, and the contractor ultimately agreed to repair the uneven flooring. 
In the months that followed, Plaintiffs identified additional issues with the out of level flooring, and despite agreeing to perform additional repairs in January 2017, Noble Ridge did not return to the home. 
In April 2017, Plaintiffs hired another construction expert who performed intrusive investigations at the home and concluded the home suffered from significant construction defects including water intrusion, code violations, poor structural framing, and poor ventilation.  Plaintiffs thereafter commenced litigation against Noble Ridge.
The trial court dismissed Plaintiffs’ claims based on the one-year contractual limitations period in the contract.  The Court of Appeals also agreed the one-year limitations period was enforceable and affirmed the dismissal.
On appeal, the Supreme Court was asked to determine whether the warranty provision was substantively unconscionable.  Relying on earlier precedent in Gandee v. LDL Freedom Enters., Inc. 176 Wn.2d 598, 603, 292 P.2d 1197 (2013), the Court recognized that a contract term is substantively unconscionable where it is “one-sided or overly harsh,” [s]hocking to the conscience,” “monstrously harsh,” or “exceedingly calloused.” 
Initially, the Court noted that the shortened contractual period deprived Plaintiffs of the six-year construction defect statute of limitations provided by RCW 4.16.310.  The Court found that the statute created a policy which balanced the relative interests and rights of contractors and homeowners, whereas the contract’s shorter limitation period benefitted only the contractor.
In addition to substantive unconscionability, the Court also analyzed the contract’s terms under the multi-factor procedural unconscionability test provided in Burnett v. Pagliacci Pizza, Inc., 196 Wn.2d 38, 54, 470 P.3d 486 (2020).  The Court found that Plaintiffs were laypersons, and Noble Ridge drafted the contract.  The holding further provided there was no indication the one-year limitation provision was bargained for, negotiated, or that any specific consideration was paid. 
While the Court ultimately invalidated the one-year limitation period set forth in the contract, the Court did not go so far as to hold that any limitations period shorter than the six years allowed by RCW 4.16.310 is invalid per se. 
In fact, the holding gives guidance for drafting contracts with a shorter limitations period that are more likely to be enforced.  Specifically, any terms which provide for a shorter limitations period should stand alone and be clearly separated from other unrelated terms.  Similarly, language affirming that a shorter limitations period was specifically bargained for, negotiated, and separate consideration was paid (supported by evidence of the same) will likely tip the scales in favor of enforceability. 
The majority’s reasoning highlights that while one-year limitations periods are not per-se unenforceable, such provisions will certainly be subject to closer scrutiny from Washington courts moving forward.