What defines the completion of a contract for the purposes of legal action?
Effective July 1, contractors have a better idea of when a contract is finished due to a recent change to Florida law. In June of this year, Governor Scott signed House Bill 377, which amended the statute that deals with limits for filing lawsuits related to defects in design or construction on real estate improvements. For actual flaws in design or construction, the statute of limitations is four years. For latent defects — those that are not immediately discoverable — the statute of repose is 10 years.
But when does that 4- or 10-year period begin? The courts were inconsistently determining when the clock started ticking for the 10-year statute of repose, due to unclear language in the statute. The time limit for filing a suit was stated as the later of several events OR, the completion or termination date of the contract. But what defines completion of a contract? Is it when construction is completed, when final payment is due, or when it is made? In a 2015 ruling, the court decided that contract completion meant when final payment was made.
And the problem with that is that contractors have little control over how long a customer drags out final payment, thereby extending the time that an action could be brought against the contractor for defects. So the statute has been fixed.
The new law amending § 95.11(3)(c) states that “completion of the contract means the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made.” Good news for construction contractors.
As a best practice, contractors should always be aware of and track all obligations arising from warranties and guarantees. Now, contractors can also know and track limitation periods on responsibility for defects under a contract. It’s a good idea for construction professionals to review their planning, design or construction contracts to tighten up specifics on payment due dates and final performance dates, as well as establish or revise policies and procedures for putting all parties on notice when final performance per a contract occurs.
For suggestions on more ways to help limit risk and exposure, contact the professionals at Alter Surety Group at (305) 517-3803 or visit www.altersurety.com.