Background

In September of 2014, Tully Construction entered into a contract with the Triborough Bridge & Tunnel Authority to rehabilitate the Hugh Carey Tunnel (formerly the Brooklyn-Battery Tunnel). Two months later, Tully entered into a subcontract with Gibraltar Contracting for the tiling scope of work. The contract included a shortened limitations period of six months from the owner’s issuance of a certificate of substantial completion or, if no such certificate was issued, then six months from the owner’s acceptance of the work.

Gibraltar performed its obligations under the contract, including extra work—including a $4.5-million change order resulting from then-Gov. Andrew Cuomo’s last-minute requirement to use “New York Blue” and “New York Gold” tiles instead of the white tiles specified. Gibraltar was also impacted by delays, and it incurred costs accordingly.

When payment for several open change orders and Gibraltar’s impact costs was not forthcoming, Gibraltar sued, seeking payment of more than $5 million. Tully moved to dismiss the lawsuit, citing the shortened limitations period and providing the court with a document on MTA letterhead, signed by its Chief Engineer, denominated as a “Certificate of Final Completion,” advising that Tully had fully performed its work, and recommending acceptance of the project.

Decision

The motion court denied the motion, citing the provision of the contract that required either the issuance of a certificate of substantial completion or of final acceptance by the owner, noting that the document provided was only a recommendation that the owner accept the project, not the acceptance itself. Tully appealed, and the appellate court affirmed. In doing so, after citing well settled case law that the six-month limitations period, itself, was not unreasonably short, the appellate court agreed that the document provided was not the final acceptance of the project but only a recommendation that it be accepted.

Comment

This column often notes that the construction contract is the single most important document defining the relationship between the parties. Here, the court reminds us that while parties are free to agree to shorten the time within which to start a lawsuit arising out of the contract, the happening of the triggering event must be unequivocal. The document used here, a document entitled “Certificate of Final Completion” drafted on MTA letterhead, signed by several layers of employees up through the agency’s chief engineer was still equivocal because it only contained a recommendation that the TBTA accept the project, and was not the acceptance itself required by the contract.

While there is a narrow exception to this freedom—that the limitations period cannot be so short that it runs before the claim actually accrues (here, the appellate court was ok with a six-month period)—the consequence here of a document that did not strictly meet the contractual triggering event was to permit a claim that would otherwise have been subject to dismissal under the shortened limitations period.

While Gibraltar was saved by this fortunate circumstance, generally parties would be advised that where they have agreed to a shortened limitations period—and where the events triggering the running of the period are clear—they must exercise extra diligence to do everything they need to do to preserve and prosecute their claims within that shortened period.

Similarly, if you are the beneficiary of such a provision, you must make sure that you actually trigger the running of the shortened period exactly as set forth in the contract. Subcontractors often overlook such clauses when initially reviewing the subcontract, or when putting their claims together at the end of the project.

Consulting with construction counsel in drafting and reviewing contracts so that you can be sure that any shortened limitations period passes the reasonableness test (and does not run before the claim accrues), how to best trigger the provision, and how to best timely assert any claims within that shortened period, could be very helpful. Also, please study your contract at the beginning of the job, not at the end.

About the authors: Thomas H. Welby, Esq., P.E., is General Counsel of the CIC and BCA, and a Founder and Senior Counsel of the law firm Welby, Brady & Greenblatt, LLP. Gregory J. Spaun, Esq., is General Counsel of the Queens and Bronx Building Association and a partner with LBG LLP.  

Published: February 13, 2025.