Contract Ambiguity Affected Accrual of Claim, and Statute of Limitations Analysis

A seemingly minor ambiguity in contract terms, probably unnoticed at the time, has affected the timeliness of a claim for construction defects.

The contract was signed in 2008, after the 2007 updates to the AIA contract forms had been published. The contract form, in what the court described as a “boilerplate” clause, stated that the contract documents included the “current edition of AIA Document A201.” That would have been the 2007 edition. A list of contract documents, though, specifically identified the 1997 edition of the A201 as the general conditions for the contract.

The 1997 edition of the A201 stated: “any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events no later than such date of Substantial Completion.” In contrast, the 2007 edition of the A201 stated that claims should be asserted “within the time period specified by applicable law, but in any case not more than 10 years after the Substantial Completion of the Work.”

The project was substantially complete in April 2009, and a three-year statute of limitations applied. The owner discovered problems in September 2013, and filed a lawsuit soon after. Thus, if the 1997 edition of the A201 was the pertinent version, the statute of limitations expired in April 2012. And if the 2007 edition was in the contract, the lawsuit was timely.

Applying “well-settled rules of contract construction,” the court held that the typed reference to the 1997 edition took priority over the boilerplate reference to the “current edition.” (Many readers are aware that this is a normal principle of construing contracts, as specially-drafted or modified terms will take priority over conflicting terms contained within standard or standardized forms.) Applying the language of the 1997 edition to the three-year statute of limitations, the court held that the owner’s claim was untimely. All arising from an ambiguity that may only have been discovered once the claim arose.

The case is Black Diamond Hope House, Inc. v. U & I Invs., LLC, 2018 Del. Super. LEXIS 2 (May 22, 2018) (LEXIS subscription required).