§25.4 Statutes of Limitation and Tolling Agreements

• Jurisdiction: Washington

§25.4 STATUTES OF LIMITATION AND TOLLING AGREEMENTS

There are various statutory limitation periods applicable to claims in the construction industry in Washington. This section of the chapter will discuss some of the most common statutory limitation periods that need to be considered when prosecuting or defending claims arising out of construction: statutes of limitation, the statute of repose, and other statutory limitation periods. It will also briefly discuss the limitations on altering these time periods by contract.

(1) Statutes of limitation

A statute of limitations is a statutorily set period of time that bars a plaintiff from bringing an accrued claim. Wash. State Major League Baseball Stadium Pub. Facs. Dist. v. Huber, Hunt & Nichols-Kiewit Constr. Co., 176 Wn.2d 502, 510, 296 P.3d 821 (2013). Below are some of the more common limitation periods that could be applicable to claims involving construction:

• Trespass: 3 years, RCW 4.16.080(1)

• Tort/Negligence/Breach of Implied Warranty of Habitability/ Breach of Fiduciary Duty: 3 years, RCW 4.16.080(2)

• Fraud/Negligent Misrepresentation: 3 years, RCW 4.16.080(4)

• Breach of Contract (oral contracts or existing obligations incorporated into written agreements): 3 years, RCW 4.16.080(3)

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• Breach of Contract (express written provision or liability arising from a written agreement): 6 years, RCW 4.16.040(1)

• Other Actions Not Otherwise Specified (negligent damage to real property nuisance etc.): 2 years, RCW 4.16.130.

• Contract for Sale of Goods: 4 years, RCW 62A.2-725

• Consumer Protection Act Violations: 4 years, RCW 19.86.120

• Accounts Receivable: 6 years, RCW 4.16.040(2)

• Condominium Act Warranties: 4 years, RCW 64.34.452

• Contribution: 1 year from settlement, RCW 4.22.050

Most of the above statutes of limitation are self-explanatory. Application of some more difficult statutes of limitation are discussed in more detail below.

(a) Accounts receivable versus account stated— applicable statutes of limitation

An account stated and an account receivable are two separate causes of action, each one subject to its own limitation period. An account receivable is "an amount due a business on account from a customer who has bought merchandise or received services," Tingey v. Haisch, 159 Wn.2d 652, 659, 663, 665, 152 P.3d 1020 (2007), whereas an account stated is a mutual agreement of the correct amount due and owing as a final adjustment of two parties' mutual dealings to which the account relates. Sunnyside Valley Irrig. Dist. v. Roza Irrig. Dist., 124 Wn.2d 312, 315-16, 877 P.2d 1283 (1994). Additionally, an account stated is an admission by each party of the facts asserted and a promise by the debtor to pay the sum indicated. Woodley v. USAA Cas. Ins. Co., 175 Wn.App. 1038, No. 68342-0-1, 2013 WL 3477277 (July 8, 2013) (unpublished). Mere rendition of an account by one party to another does not show an account stated. Sunnyside Valley, 124 Wn.2d at 316. A three-year statute of limitations applies to an account stated. Id. (citing Tonkon v. Small, 143 Wash. 665, 255 P. 1033 (1927)).

In contrast, actions on accounts receivable are governed by RCW 4.16.040(2). For many years, "account receivable" had no statutory definition. Washington courts had therefore defined account receivable as "an amount due a business on account from a customer who has bought merchandise or services." Tingey, 159 Wn.2d at 663. The legislature, unhappy with the definition in Tingey, amended the statute in 2007 to add the following definition of an account receivable: "any obligation for payment incurred in the ordinary course of the claimant's business or

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profession, whether arising from one or more transactions and whether or not earned by performance." RCW 4.16.040(2). A six-year statute of limitations applies to the enforcement of such actions. Id. Where the Tingey definition of accounts receivable was narrower and did not apply to all oral contracts, the definition created by the legislature was broad. Thus, an action for payment for services or goods under an oral contract has a longer limitation period than other oral contractual obligations.

(b) Three-year versus six-year breach of contract claims

In Washington obligations arising out of written contracts generally are governed by a six-year statute of limitations and obligations arising out of oral contracts are generally governed by a three-year statute of limitations. Although that is a good rule of thumb, it is not always the case. Washington has a unique statute of limitations for written contracts, and there are circumstance when an obligation contained in a written agreement is in fact governed by a three-year or other statute of limitations. As discussed above, there are also claims that arise out of an oral contract, but which are subject to a six-year statute of limitations. Understanding which contractual liabilities are subject to a six-year limitation period and which liabilities are subject to shorter statutory time periods is important not only when analyzing which claims are stale but also in drafting contractual clauses.

When evaluating whether a particular claim falls within the six-year statute of limitations, RCW 4.16.040(1), Washington courts look at the actual harm alleged and determine whether the pending claim arises from (1) an express promise contained in a written agreement; or (2) a liability that follows by natural or reasonable implication, as distinguished from liabilities created by law or imported into the agreement from an external source. Bicknell v. Garrett, 1 Wn.2d 564, 571, 96 P.2d 592 (1939). A general provision in a contract requiring compliance with a duty already owed under common law or a statute is insufficient to meet the requirements of RCW 4.16.040(1)'s "express promise" provision and also do not constitute a liability arising solely out of a written agreement. As such, a three-year limitation period applies to such liabilities.

In analyzing what constitutes an "express promise," Washington courts analyze the specific obligations stated in the contract. See Bennett v. Computer Task Grp., 112 Wn.App. 102, 47 P.3d 594 (2002). The Supreme Court in Bicknell instructs that for there to be a qualifying writing under RCW 4.16.040(1) for the six-year limitation period to

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apply, there must be a liability "expressly stated in a written agreement or which follow[s] by natural and reasonable implication from the promissory language of the agreement, as distinguished from liabilit[y] created by fictional processes of the law or imported into the agreement from some external source." Bicknell, 1 Wn.2d at 570-71.

An example of a written contract provision that was not specific enough for the six-year statute of RCW 4.16.040(1) to apply is the employment contract in Bennett. That contract contained an express written promise that the employer would comply with state and federal law. Bennett, 112 Wn.App. at 106. A similar requirement to comply with applicable laws, codes, and regulations is contained in many construction contracts, especially with regard to safety or design. In Bennett, the court noted that both state and federal law specifically required employers to pay overtime wages to hourly employees and held that "Bennett's action is not one 'upon a contract in writing' because his employment contract does not contain an express promise to pay overtime." Id. at 109. Without a specific promise related to the specific claim, the cause of action did not fall under RCW 4.16.040(1)'s six-year limitation period and instead fell either under the three-year wage statute or the three-year limitation period in RCW 4.16.080(3). The Bennett court's analysis went further and compared out-of-state law to examine express liabilities, finding that the six-year breach of contract statute of limitations in RCW 4.16.040(1) applied only when there were "detailed measures" and when "precise promises [were] made," which it did not find in a general contractual provision to comply with the law. Id. at 113-14.

Another instructive Washington case in interpreting the type of express promises that are required in written contracts for the six-year statute to apply is Busk v. Flanders, 2 Wn.App. 526, 468 P.2d 695 (1970). There, when looking at what is required to constitute an "express promise" as required in RCW 4.16.040(1), the court clarified that a liability against a licensed professional, such as an attorney, architect, or engineer, is not a liability express or implied arising out of a written agreement unless the agreement either (1) guaranteed a specific result or (2) assured the effect of the professional's services. Id. at 530. It is rare to find such guarantees or assurances in such contracts.

Even if there are specific promises contained within a written agreement, however, it still does not mean that the six-year statute of limitations will apply. Often in a dispute, parol evidence is needed to interpret the contract. The three-year statute of limitations in RCW 4.16.080(3) governs if parol evidence is necessary to establish

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any material element of a written contract because the contract is considered partly oral. See Bogle & Gates v. Zapel, 121 Wn.App. 444, 90 P.3d 703 (2004).

In a 2015 unreported decision, Division I of the Washington Court of Appeals reemphasized the premise that violations by a professional of a standard that is implied in every agreement (such as a professional standard of care) is governed by a three-year and not six-year statute of limitations. Block v. Law Offices of Ben F. Barcus & Assoc., PLLC, 189 Wn.App. 1006, No. 71742-1-1, 2015 WL 4531138, at*2 (July 27,2015) (unpublished). There, an attorney's client brought claims related...