During what period of time following execution of a construction contract may a party to that agreement bring a claim in the courts for breach of contract?
The general limitation period to a party to bring a claim in the courts for breach of contract is 20 years. However, claims for works defects are time-barred, a limitation period of three years following the date of completion of public construction works and a limitation period of five years following the date of completion of private construction works of buildings are the rule.
In each state of Australia, legislation imposes a time period by which proceedings must be issued for a claim or dispute arising out of a contract. There are also limitation periods applicable to proceedings arising out of the Australian Competition and Consumer Act (such as misleading and deceptive conduct). Generally, the limitations of action legislation in each state and territory provides that actions with respect to torts and simple contracts which are written or oral cannot be brought more than six years after the date on which the cause of action accrued. However, this limitation period ranges from 12 to 15 years in state and territories legislation for contracts which were created by being formally documented in what is known as a 'deed'.
Finally, in Victoria, causes of action which are defined as a 'building dispute' cannot be brought more than 10 years after the date of completion. Specific advice should always be sought in terms of the limitation period which applies to any particular cause of action.
In contract, the cause of action accrues when a breach of that contract occurs rather than when the damage or actual loss is suffered or discovered. In negligence, the cause of action usually accrues when the loss is suffered or incurred.
A failure to issue proceedings before the relevant time period expires is likely to result in that claim becoming 'time barred'.
As a general rule, a claim for breach of contract may be brought before the courts by any of the parties within 10 years after the breach or knowledge of the breach by the party in default.
However, according to Belgian jurisprudence, any claim relating to a light latent defect (for example the swelling of window frames), should in principle be brought before the courts within as short a period of time as possible following discovery of the defect, although the limitation period with respect to light latent defects can be contractually determined by the parties. The acceptance of the works traditionally discharges the contractor from any liabilities with respect to visible light defects known to the principal at the point that the principal provisionally accepts the works. It is however not unusual to contractually determine that the provisional or final acceptance will also discharge the contractor from any liability with respect to light latent defects.
Notwithstanding the above, a contractual discharge or contractually determined limitation period is not valid for any claim with respect to serious latent defects, which compromises the stability of the building or a major part of the building. According to Belgian public order law, any such claim can be brought before the court up to 10 years following the date of final acceptance of the works (this is known as the ‘10-year liability with respect to buildings and major works’ rule).
In accordance with the Law on Obligations, claims for breach of contract can be made only within five years from the date of completion of the works, while claims related to the construction of the building can be made up to 10 years from that date.
The general comments below related to bringing claims in Canada apply to the common law provincial and territorial jurisdictions, of which there are 12. There is one additional province, Quebec, which operates under a civil law system unlike any of the other 12 Canadian jurisdictions. Due to the generality of this paper, we have excluded discussion of the Quebec legal system.
The time within which a party to a contract may bring a claim generally is imposed by provincial and territorial statutes if the parties do not provide otherwise in their construction contract. As such, the times differ between the various common law jurisdictions in Canada.
Each province and territory has a form of limitations statute prescribing the deadline by which a legal action must be commenced, in default of which the cause of action is extinguished. For example, in British Columbia, the Limitation Act, S.B.C. 2012, c.13 establishes a 2-year limitation period for most types of claims running from the date that the claimant either knows of, or reasonably ought to have known of, the basic elements of the claim. A 2-year 'reasonable discovery' test can be found in many of the Canadian common law jurisdictions. Others use a basic 6-year limitation period.
The various limitations statutes also prescribe an ultimate limitation period running from the date on which the impugned act or omission took place (and not extended by a 'reasonable discovery' test). A lengthy ultimate limitation period is common in the various Canadian common law jurisdictions, although the number of years varies typically from between 10 to 15 years. Some jurisdictions outside of Canada, such as Illinois, U.S.A. for example, stipulate an ultimate limitation period by way of a separate 'statute of repose' (which is generally not done in Canada).
Parties in Canada may agree to vary the effect of a limitations statute by contract. For example, it is possible for parties to agree that notwithstanding the limitation statute, the time limit for commencing legal action will be shorter than the two years. Similarly, parties are permitted to enter into standstill agreements postponing or lengthening the running of time under the applicable limitation statute, usually to defer an ancillary dispute (or potential ancillary dispute) until such time as the principal dispute is determined. Such agreements are typically struck if there is a prospect that a particular determination of the principal dispute will render the ancillary dispute moot.
No matter what the limitation period is, it is necessary to determine at the outset of any new claim whether the limitation period has expired. If it has, the claim will be barred, and the claimant may be prevented from bringing a claim against the alleged wrongdoer. The defendant will be able to plead a limitations defence, and the claimant will have the evidentiary burden of proving that the claim was commenced within the relevant statutory period.
Construction contracts typically provide for a limitation period of two years following the date that the breach of contract is discovered (or should have been discovered).
The general limitation period is five years, whereas the limitation period for commercial contracts is three years.
Under the Czech Civil Code, there are different limitation periods which apply to different types of cause of action. The general limitation period for a normal contract claim is three years, but parties may agree to extend or shorten it. The minimum period is one year and the maximum is fifteen years. No regard is taken of the agreements which disadvantage the weaker of the parties to the contract.
According to the general conditions in the standard form construction contracts, AB 18 and ABT 18, the employer´s claim against the contractor for defects shall be made within five years of handing-over (completion) of the work. After this time the employer is not entitled to make a claim against the contractor.
Besides the limitation periods in AB 18 and ABT 18, limitation periods are imposed by the Limitation Act dated 9 November 2015. The Limitation Act provides for different limitation periods for various types of actions but does not apply where AB 18 and ABT 18 are used.
Under the Limitation Act the limitation periods in AB 18 and ABT 18 are not applicable between a commercial contractor and a non-commercial employer. The Limitation Act provides for three different limitation periods: A three-year limitation (called the "relative" deadline for complaints) and a 10-year or 30-year limitation (called the "absolute" or "ultimate" deadline for complaints) depending on the type of the claim – respectively property damage, personal injury or environmental damage.
Subject to the application of specific liabilities (see below), a claim for breach of a contract by one party can be brought during 5 years from the day on which this party knew or should have known the facts enabling the exercise of its right.
Under the German Civil Code claims in respect of construction contracts become statute-barred after two years in relation to works whose result consists in the manufacture, maintenance or alteration of a moveable asset or in the rendering of planning or monitoring services for this purpose, and after five years in relation to works whose result consists in the manufacture, maintenance or alteration of a building or works consisting of planning or monitoring services for this purpose, and apart from this, after the regular limitation period of three years.
Where the contracting parties have agreed to apply the contracting rules for the Construction Contract Procedures Part B (VOB/B) it is common not to apply the warranty periods specified there of between one and four years depending on the type of work. In derogation of the VOB/B the parties often agree on different periods on a case-by-case-basis, namely:
In maintenance contracts, the parties usually agree on longer warranty periods. Although in principle the parties are free to agree on warranty periods, indefinite warranty periods or periods of an unreasonable length will not be effective. It is therefore better to agree on the usual time periods.
In Hong Kong, limitation periods are imposed by statute, primarily the Limitation Ordinance (Cap. 347 of the Laws of Hong Kong). There are different limitation periods for different types of cause of action. For example, the limitation period is six years for a normal contract claim, but twelve years if the contract was created by deed (this is a special way of executing a contract and most building contracts are executed in this way).
In a contract claim, the limitation period will run from the date when the contract was breached. It will thus be necessary to determine whether or not the limitation period has expired. If it has, the claimant may be barred from bringing a claim against the alleged wrongdoer. By the same token, if a claim is brought out of time, the defendant will be able to plead the defence of limitation.
The general limitation period, including the period available to file claims for damages, is five years.
Guarantee claims can be made within the deadline set forth in the construction contract. In certain cases, the (minimum) guarantee period is prescribed by law.
The Statute of Limitations 1957 requires plaintiffs to bring actions within six years of the date of the contract breach and within 12 years where a contract is executed under seal (unless the contract expressly provides for six years).
In Ireland, the same limitation periods apply to proceedings issued in court and arbitration. In many Irish standard form contracts, conciliation is stated to be a pre-condition to arbitration. Accordingly, contracting parties must be aware that issuing proceedings in conciliation will not stop the clock running for the purposes of the Statute of Limitations.
The construction contracts are subject to the normal statute of limitations regarding contractual breaches, equal to ten years from the date on which the contractual breach takes place and the non- defaulting party is legally entitled to act against the other party. However, the following specific limitations are provided by the law in relation to construction contract.
With regards to hidden defects of the works and non-compliance of the works with the agreed design the contractor may be summoned by the employer within two years from the date of delivery of the works, provided that the employer has notified the contractor, within 60 days from the discovery of the defect, of their existence. Should the employer be summoned before a court by the contractor for the payment of the contract price, the employer may in any event counterclaim in respect of the defects provided this has been notified as per the previous paragraph and, in any event, within two years from the date of the acceptance of the works. Please note that the employer shall not be entitled to enforce such guarantee should have the employer accepted the works and the defects were known or recognizable by the employer unless the contractor has not disclosed their existence with malice.
Of course, the parties may agree in the contract on improvements and/or extension of the above defect warranty regime (eg including coverage of recognizable defects or specifying that the defect warranty period will start as from the issuance of the positive testing certificate).
With regards to serious defects of the works and risk of collapse and ruin, the employer (and its successors in title) shall notify the existence of the defect within a year from the discovery. Subsequent to the submission the notice, the employer (or its successor in title) shall be entitled to file a claim against the contractor within a year.
The general limitation period for a party to bring a claim in the courts for breach of a contract is five years from when the claiming party recognizes the breach or ten years from the breach, whichever is earlier.
The limitation period for defect liability under the Civil Code is five years from when the claiming party recognizes the defect (breach) or ten years from the defect (breach), whichever is earlier. (In the standard construction contract form, except for certain types of defects in residential buildings for which the defect liability period is ten years from the delivery under the Housing Quality Assurance Act, (i) the defect liability period is two years from the delivery or (ii) as to interiors, furniture, or the like, the claiming party needs to do inspection after the delivery and to make a claim immediately after that, or if a defect cannot be found in such inspection, the defect liability period is one year from the delivery; provided, however, that if the defect has been caused by the contractor’s wilful misconduct or gross negligence, not these provisions but the Civil Code provisions apply.)
In addition, the claiming party is required to notify the contractor of the defect within one year from when the claiming party recognizes the defect; provided, however, that such notice is not required if the contractor knows the defect or does not know the defect with gross negligence. (In the standard construction contract form, this one-year notice requirement is excluded.)
The period of limitation or expiry period can differ between contracts. This mainly depends on which general conditions or legal regime the parties have declared applicable to the (construction) contract in question. Additionally, the parties can agree that different provisions regarding the duration of the limitation periods or their operation will apply. Limitation periods can vary from two to twenty years.
The Limitation of Actions Act 2004 (as amended) and the relevant States Limitation Laws prescribe the specific periods within which legal actions are to be commenced or instituted from when the injury or omission, causing the damage or loss, arose or occurred. The prescribed period for contracts under Sections 8 (1) (a) and 12 (1) (a) of the Limitation Law of Lagos State 2015 is six years for simple contracts and twelve years for contracts under seal (made by way of a Deed).
Typically, most construction contracts are made by way of deed. A claim for breach of the contract must be commenced within 12 years from the date the event giving rise to the breach occurred. In the event that the construction contract is not made by way of a deed, a simple contract, the limitation period is six years.
In Norway, limitation periods are imposed by the Limitation Act of 1979. The general limitation period is three years.
The Limitation Act also provides for a supplementary limitation period. If a creditor has not made a claim because he did not have knowledge of the claim or of the debtor, the limitation period will expire one year after the date on which the creditor obtained or should have obtained such knowledge. This supplementary limitation period is often useful in cases of hidden defects. The limitation period cannot be extended under this provision beyond 10 years, and 13 years in total from the limitation period starts.
The limitation period will run from the date when the contract was breached. It is necessary, at the outset of any new claim, to determine whether or not the limitation period has expired. If it has, the claim will be ‘statute-barred’ and the claimant may be prevented from bringing a claim before courts.
In addition, some of the standard documents include regulations on notification periods, some of which may have preclusive effects. For example, for any variation claims rejected by the client under a D&B standard document (NS 8407), the contractor must take necessary steps to initiate ordinary court (or arbitration) proceedings no later than eight months after the taking over of the entire contract work. Failure to do so may result in a loss of the variation claim.
In Poland, limitation periods are imposed by the Civil Code. There are different limitation periods for different types of action. Unless a specific provision states otherwise, the period of limitation is ten years and three years for claims pertaining to requirements for periodical performance (eg paying money on a regular basis) and claims resulting from an economic activity. The period of limitation for claims resulting from a construction contract is three or six years (depending on the professional character of the party).
The general limitation period is 20 years. However, claims for defects are time-barred after five years following the date of completion of the construction works. A longer period may be agreed by parties.
Hidden defects in the construction are guaranteed by the contractor for 10 years and defects affecting the structural core of the construction are guaranteed for the entire “life” of the building. These statutory guarantee periods start from the completion of the project, as evidenced by the handover minutes. As the duration of the guarantees is laid down for reasons of public interest, contractual provisions which reduce the legal period of guarantee are deemed null and void.
The contractor’s liability for evident defects is triggered only (i) if expressly agreed by the parties in the contract or (ii) if the handover minutes were obtained by fraud.
Romanian legislation expressly provides for a limitation period within which legal proceedings must be commenced against the contractor in relation to defects or deficiencies in the construction. The limitation period is three years and starts on the date of discovery of the defects, which cannot be any later than the expiry of the guarantee period.
These guarantees only benefit the parties involved in the construction agreement (eg the contractor, designer, suppliers of materials and construction products, construction supervisors or certified technical experts) and cover only the obligations which are expressly regulated by Law 10/1995 regarding construction quality.
For any other obligations arising from the construction agreement, the limitation period for starting legal proceedings against the contractor is three years starting on the date the relevant obligation becomes due.
The limitation period depends on whether the regime of the Commercial Code or that of the Civil Code will apply.
In compliance with the provisions of the Civil Code, the general limitation period is three years commencing on the day when the right could be exercised for the first time. In the case of liability for damage, the right to damages becomes statute-barred after two years from the aggrieved party becoming acquainted with the damage and knowing who is liable for it and, in any event, will lapse after 3 years (or in the case of the damage caused purposely, 10 years) from the event creating the right for damages. This time period will not apply to damage caused to health.
According to the Commercial Code the general limitation period is four years. The limitation period for the right to damages commences on the day the aggrieved party became or could have become aware of the damage, and who is liable for it. The right to damages shall become statute-barred not later than 10 years from the day when the breach of obligation causing damage occurred.
With regard to liability for defects; the court will not allow the client any remedy in respect of defects in the work or building, if the client does not notify the defects either without delay after the defects are detected, or without delay after the obligatory inspection is carried out, or without delay after the defects could have been detected exercising due care, and in any event not later than 2 years after the work is handed over to the client or, in the case of buildings, not later than 5 years.
In Spain, the general rule is that claims in respect of a breach of contract must be brought within five years of the date of the breach. Despite this the Spanish Building Act, lays down specific time periods during which a claim may be brought against the party involved in the construction depending on the type of the defect affecting the building.
The period of liability is ten years from approval of the construction works according to the General Conditions of Contracts - AB 04 and ABT 06 and the Limitation Act (Preskriptionslagen). The ten year liability period is, however, subject to several limitations.
Under the Civil and Commercial Code, either party may take legal action against the defaulting party for breach of contract at the date of the breach of contract. The Civil and Commercial Code does however impose prescription periods upon the cause of action as follows:
Furthermore, a claim for damages arising from a wrongful act is barred by prescription after one year from the day when the wrongful act and the person bound to make compensation became known to the injured person, or ten years from the day when the wrongful act was committed. In addition, no action against the contractor can be brought later than one year after the defect appeared.
If no other period of prescription applies, the law provides a ten year prescription period by default.
Under Abu Dhabi law, limitation periods are set out in the Civil Code and the Commercial Transactions Code, which provides for a limitation period of 10 years. In a contract claim, the 10-year limitation period will run from the date when the contract was breached, which for latent defects is likely to be the date of practical completion, however the limitation period for initiating a claim for major defects affecting the stability or safety or a structure under the decennial liability provisions of the Civil Code is 3 years from the collapse or discovery of the defect. It will be necessary, at the outset of any new claim, to determine whether or not the limitation period has expired. If it has, the claim will be 'statute-barred' and the claimant may be prevented from bringing a claim against the alleged wrongdoer. If a claim is brought out of time, the defendant will be able to plead the defence of limitation and the claimant will have the burden of proving that the cause of action arose within the relevant statutory period.
Under Dubai law, limitation periods are set out in the Civil Code and the Commercial Transactions Code.
In a contract claim, the limitation period will run from the date when the contract was breached. It will be necessary, at the outset of any new claim, to determine whether or not the limitation period has expired. If it has, the claim will be 'statute-barred' and the claimant may be prevented from bringing a claim against the alleged wrongdoer. If a claim is brought out of time, the defendant will be able to plead the defence of limitation and the claimant will have the burden of proving that the cause of action arose within the relevant statutory period.
In England and Wales, limitation periods are imposed by statute, primarily the Limitation Act 1980. There are different limitation periods for different types of cause of action. For example, the limitation period is six years for a normal contract claim, but 12 years if the contract was created by deed (this is a special way of executing a contract and most building contracts are executed in this way).
In a contract claim, the limitation period will run from the date when the contract was breached. It will be necessary, at the outset of any new claim, to determine whether or not the limitation period has expired. If it has, the claim will be ‘statute-barred’ and the claimant may be prevented from bringing a claim against the alleged wrongdoer. If a claim is brought out of time, the defendant will be able to plead the defence of limitation and the claimant will have the burden of proving that the cause of action arose within the relevant statutory period.
The Building Safety Act 2022 (BSA 2022) has introduced an amendment to the Limitation Act 1980 extending the limitation period for claims under the Defective Premises Act 1972 (DPA 1972) as follows:
Prior to these amendments, claims under section 1 of the DPA 1972 had a limitation period of six years.
In Scotland, contracts are subject to prescription. Prescription is a legal mechanism which establishes or extinguishes certain rights or obligations by the passage of time. Essentially, a claim in damages for breach of contract may (as it is a financial claim) be brought within the period of five years from the date when the party’s right of action first arose (under the Prescription and Limitation (Scotland) Act 1973). Note that the prescriptive period does not start to run where the party claiming was not (and could not with reasonable diligence have become) aware that the loss had occurred. It is generally accepted that such a right of action would prescribe after a period 20 years from the date upon which the right of action first arose (known as “long negative prescription”). That said, construction contracts and consultant appointments will often provide an express “long stop date” contractually limiting the duration of the contractor’s / consultant’s liability and/or the employer’s right to raise actions to a period of 10 or 12 years from the date of Practical Completion of the works.
On 1 June 2022, the Prescription (Scotland) Act 2018 finally came into effect and amended the 1973 Act to provide that the 5-year prescriptive period will not begin to run until the claimant has actual knowledge (i) that loss, injury or damage has occurred, (ii) that the loss, injury or damage was caused by a person’s act or omission and (iii) of the identity of the person who is the wrongdoer. Therefore, the 2018 Act preserves a claimant’s right of action for a longer period than would be the case under the 1973 Act before time-bar (estoppel) applies to the claim.
The Building Safety Act 2022 (which also took effect on 1 June 2022) came into existence as a direct result of the Grenfell Tower fire in London in 2017 and its aftermath. The purpose of the 2022 Act is to introduce wide-ranging measures to seek to prevent a repetition of the Grenfell Tower disaster. This includes a prohibition on the use of combustible cladding materials in multi-storey accommodation and the amending of the 1973 Act to increase the period of prescription so that:
In tandem with 2022 Act coming into force, the Building (Scotland) Amendment Regulations 2022 took effect, introducing a ban on the use in Scotland of combustible cladding on any buildings of 11 metres or more in height which fall into any of the following categories:
The times within which a party to a contract may bring a claim generally are imposed by state statutes if the parties do not provide otherwise in their construction contracts. As such, the times differ from state to state in the US and there are different limitation periods for different types of cause of action.
For example, in Illinois, the statute of limitations for construction defects is four years (735 ILCS 5/13-214(a)) and the statute of repose is 10 years (735 ILCS 5/13-214(b)). Together, these Illinois statutes provide that a person must bring a claim within four years of learning of the defect (statute of limitations) but in any event must bring the claim within ten years of substantial completion of the project (statute of repose). The Illinois statute of repose also provides an extension: if the defect is learned of anytime within the 10-year statute of repose, then the entity still has four years to bring a claim from the time of learning of the defect, even if the 10-year statute of repose is exceeded. Not all states, however, permit extensions for late-discovered defects. As indicated above, the requirements vary from state to state.
Parties in Illinois also may agree to a different limitation period, as long as reasonable. To illustrate, AIA documents generally provide that construction defects must be brought within ten years of substantial completion, with no provision for an extension. Thus, if parties in Illinois use an AIA document and want to provide for the extension allowable by Illinois law, the parties could modify the applicable provisions in the AIA document. Absent modification, the parties to such AIA document would not be entitled to the four-year extension granted by the Illinois statute of repose.
No matter what the limitation period is, it is necessary to determine at the outset of any new claim whether the limitation period has expired. If it has, the claim will be barred, and the claimant may be prevented from bringing a claim against the alleged wrongdoer. The defendant will be able to plead the defence of limitation, and the claimant will have the burden of proving that the cause of action arose within the relevant statutory period.
The ordinary period of prescription is three years under the terms of the Prescription Act [Chapter 08:11]. A period of prescription may be waived by the parties to an agreement.