June 1, 2013
By Bob Incollingo
It used to be that when I took on a new client, all I asked him to do was to cooperate, to promptly provide all original documents or other information available to him, to keep me informed of developments, to abide by our agreement, and to pay his bills on time.
Not any more.
A disturbing recent trend in New Jersey business is the use of contract terms which drastically shorten the ordinary six-year or four-year deadline for bringing claims against the breaching party. I think this is a bad idea that introduces unwanted risk into agreements, but my view is colored by practical experience and nanny state leanings. The courts on the other hand insist that people read what they sign, and don’t seem to mind. Generally therefore, “[c]ontract provisions limiting the time parties may bring suit have been held to be enforceable, if reasonable.” Eagle Fire Protection Corp. v. First Indem. of Am. Ins. Co.,145 N.J. 345, 354, 678 A.2d 699 (1996) (citations omitted). Such provisions are accepted by the courts as long as they do not violate public policy. A.J. Tenwood Assoc. v. Orange Senior Citizens Housing Co.,200 N.J.Super. 515, 523-24, 491 A.2d 1280 (App.Div.), certif. denied,101 N.J. 325, 501 A.2d 976 (1985). While the supporting cases have been around for a while, the increasingly frequent appearance of these kinds of contract clauses is a new development.
People have come in to my office in recent days with no rights left to enforce, because their contractually shortened time to act had expired without their realizing it. Because of this trend, I now insist that a new client take on the duty to notify me before retaining me if his contract contains a shortened deadline for bringing suit. Under my revised agreement for legal services, clients specifically assume the risk of any limitations period shortened by contract, where circumstances do not provide me with a commercially reasonable time to review and take appropriate action to address such issues.
If I’m taking the trouble to cover myself on this, I think you should too. I hope this note raises your awareness. Please don’t sign anything that shortens your time to sue for breach of contract.
Robert J. Incollingo is a South Jersey business, construction and real estate litigator whose practice focuses on protecting contractors, suppliers, and private owners.