BY JACOB ZAHNISERThis article originally appeared in the July 20, 2016 edition of the Cascade Business News
Oregon law contains two important time limits for bringing construction claims on private projects: (1) the statute of limitations and (2) the statute of repose. Both statutes cut off legal rights when those rights are not enforced within a certain time. However, each statute has different triggers: the statute of limitations is typically triggered by “discovery” of the injury and who caused it. By contrast, the statute of repose is triggered by the completion of an act. In the last five months, the Oregon Supreme Court has issued two opinions addressing the statute of limitations and the statute of repose, both of which will have significant impacts in the construction industry.
First, on February 19, 2016, the Oregon Supreme Court decided Shell v. The Schollander Companies, Inc., concluding the ten-year statute of ultimate repose for spec homes runs from the date of “the act or omissions complained of” even if the contractor continues to work on the house. Prior to the Shell decision, there was substantial uncertainty as to whether the repose period began from the date of installation of each component or from substantial completion of the home. The Shell decision resolved the uncertainty, at least for spec homes. Now, claims of defectively installed windows, building paper, siding, or roofing must be brought within ten years from the date of defective installation.
Then, on June 16, 2016, the Oregon Supreme Court decided Goodwin v. Kingsmen Plastering, Inc., concluding that negligent construction claims are subject to the two-year statute of limitations. Prior to Goodwin, there was disagreement as to whether negligent construction claims were subject to a two-year or a six-year limitations period and whether the limitations period was subject to a “discovery” rule, meaning the clock begins when the claimant “knew or should have known” of the injury and who caused it. The Goodwin decision resolved that uncertainty. Now, claims for negligent construction must be brought within two years of when the property owner “knew or should have known of the injuries or damage that form the basis of their claims.” The exact contours of the Goodwin decision and its definition of the “discovery” rule for negligent construction claims will be subject to additional litigation.
Nevertheless, taken together, property owners and general contractors will need to be careful in the years ahead. Property owners who suspect they have problems will be well served to quickly investigate their concerns and reach out to their contractor, if possible, to discuss resolution. General contractors of specs homes will also be well served to listen to their customer’s concerns and bring their subcontractors into the dialogue early to resolve the concerns, if possible, or frame the issues for prompt judicial resolution.
Last, it is important to note that these statutes establish the default timelines in which parties to construction contracts may bring claims. Contracting parties are always free to establish their own time limitations in their contract. To avoid these default timelines, parties to a construction contract should always consider creating their own time limits, based on specified triggering events, governing the prompt and efficient resolution of claims that may arise during and after completion of the construction project.