Publications & Presentations
Mar 02, 2016
A recent decision from Minnesota’s highest court may alter the landscape of contract administration during project construction. Defects in construction, while hopefully limited, are common while construction is ongoing. These defects are typically addressed and remedied as part of ongoing construction through punch lists or otherwise, and before devolving into irreconcilable disputes leading to the courthouse steps. For projects operating under Minnesota law, however, and with possible influence beyond, the Supreme Court of Minnesota may have thrown a wrench into these typical operations.

Defective construction claims governed by Minnesota law must be brought within two years “after discovery of the injury.” In 328 Barry Avenue, LLC v. Nolan Properties Group, LLC, the court considered whether this two year limitations clock can begin to run during construction, and before substantial completion. At issue was a leaky window. The leak was identified well before substantial completion, and some 32 months before the owner brought suit against its general contractor seeking damages. The general contractor moved for summary judgment, arguing the lawsuit was untimely because the claim was not brought within two years “after discovery of the injury.” The owner countered, maintaining that the limitations period cannot begin to run during ongoing construction when defects, such as a leaky window, “are merely circumstances whereby some piece of work has yet to be completed.”

The owner’s argument was rejected. As the court decided, actionable claims based on construction defects can arise before substantial completion and while construction is ongoing. In Minnesota, an action accrues, “and thus the limitations period begins to run, when a party discovers an injury. This discovery may, as a factual matter, occur during construction, or the discovery may not occur until years after the project is completed.” And this reasoning may reach beyond the borders of Minnesota law.

So while commercial construction contracts typically require the correction of defective work in order to achieve substantial completion, and often as a requirement for final payment, owners and upstream contractors must be mindful that the time to bring construction defect claims may be running while they wait for work to be corrected during ongoing construction. On projects that span multiple years especially, formal claims may have to be asserted or preserved as a part of contract administration while construction is ongoing. Wait too long and you might be left without a remedy.