Mass Ct Rules Contractual Limitation Period Unenforceable

When hiring an environmental consultant, clients are often asked to execute an engagement letter that typically addresses the pricing for the Phase 1 and other logistical information. Attached to the engagement letter will be what often looks like a pre-printed form of terms and conditions that govern the performance of the services to be provided by the consulting firm

Clients frequently overlook the standard terms since they tend to focus on the price of the Phase 1 as well as timing for the delivery of the report. However, it is critically important that the terms and conditions provisions be carefully reviewed before executing the engagement letter because the boilerplate language can severely restrict the rights of the client in any dispute with the consultant.

For example, many consultants typically seek to limit liability for negligence or breach of contract claims to the amount of the fee for the Phase 1 ESA though some provide for higher liability caps ranging from $50,000 to $100,000. Many standard terms and contains also impose a limitation on the client’s right to bring a claim that is shorter than the applicable state statute of limitations for bringing a professional negligence or breach of contract claim. Typically, the statute of limitations for a breach of contract claim is six years.

The facts in Shahin v. I.E.S., Inc., 2013 Mass. App. LEXIS 93 (May 31, 2013) are sparse but illustrates this point. In this case, the trustee for the Hersey Street Properties Realty Trust (Trust) retained IES to conduct what the court referred to has “environmental testing and other services” in connection with sale of a property in 2006 The agreement contained an attachment identified as “Attachment B Statement of Terms and Conditions” that provided that “The [trust] agrees that the [trust] shall bring no claim against IES, Inc., and/or its owners, directors, officers, and employees, later than one (1) year after the date of this contract.

The MADEP issued a waste site cleanup notice of non-compliance in July 2009 but the opinion does not state discuss the specific violations. In December 2010, the trust filed a complaint, alleging unfair or deceptive practices, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, breach of contract, and negligence, and it sought a declaratory judgment that the contractual limitations period and a contractual cap on damages did not apply. The Superior Court judge concluded that the complaint was barred by the contractually-shortened limitations period.

The appeals court reversed. The court said that a statutory limitations period can be shortened by contract so long as the shortened period is reasonable. However, because the contractual limitations in this case in this case did not provide that for discovery rule of any alleged breach, the court held the contractual limitation was unreasonable as a matter of law unenforceable.  Query if the court would have upheld the one year limitation period if the contract provided claims must be filed within one year of the date of contract or date of discovery, whichever is later?

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