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Maryland Court of Appeals Discusses Exceptions to Shortening the Statute of Limitations by Contract

Richard and Daphne Ceccone v. Carroll Home Services, LLC
No. 85 (Court of Appeals of Maryland) by Colleen K. O’Brien, Associate & Paige
by Colleen K. O’Brien, Associate & Paige A. Neville, Law Clerk
Wilson Elser LLP (www.wilsonelser.com)

Available at: http://www.mdcourts.gov/opinions/coa/2017/85a16.pdf

Plaintiffs Richard and Daphne Ceccone (“Plaintiffs”) filed a tort and contract claim against Defendant Carroll Home Services, LLC (“CHS”). CHS provided oil and maintenance services to the Plaintiffs’ furnace, and an incident arose with the furnace which caused damage to the Plaintiffs’ home. Plaintiffs filed their complaint well before the expiration of three year statute of limitations, but arguably more than a year after their claims accrued. The District Court of Maryland dismissed the case and entered a judgment in favor of CHS based on the shortened limitations period set forth in the parties’ maintenance agreement. Plaintiffs pursued a de novo appeal to the Circuit Court for Anne Arundel County. During that appeal, the court entered judgment in CHA’s favor on the limitations period in the contract. Plaintiffs then appealed to the Court of Special Appeals which transferred the appeal to the Court of Appeals of Maryland. The Court of Appeals vacated the Circuit Court’s judgment.

Plaintiffs had signed a residential furnace maintenance agreement offered by CHS. Under the agreement, CHS agreed to provide 24-hour-a-day service for no-heat emergencies, to repair specified boiler parts if they became defective due to normal wear and tear, and to conduct a yearly “tune-up’ of the heating system. The “General Terms and Conditions” section of the agreement included a provision that reduced the period for a consumer to bring a tort or contract claim against CHA from the statutory three years to one year, although it did not limit the time period for CHS to make a claim against a consumer.

The issue on appeal was whether the shortened one-year period of limitations set forth in the maintenance agreement supersedes the three-year statutory period of limitations.

Under Maryland law, in some circumstances, parties may restrict access to the courts by shortening limitations periods by contract. Courts have reviewed these contract provisions according to a reasonableness criterion. Parties may agree to a provision that modifies the limitations result that would otherwise pertain provided (1) there is no controlling statute to the contrary, (2) it is reasonable, and (3) it is not subject to other defenses such as fraud, duress, or misrepresentation.

Factors to be considered in assessing reasonableness include: the subject matter of the contract, the duration of the shortened limitations period compared to the period that would otherwise govern, the relative bargaining power of the parties to the contract, and whether the shortened limitations period is a one-sided provision that applies to one party but not the other.

Plaintiffs’ Complaint made allegations of material and fraudulent misrepresentations by CHS. Also, Plaintiffs argued that CHS failed to respond to discovery on this subject and that the Circuit Court did not evaluate those allegations in assessing the limitations provision in the contract. The Court of Appeals held that the Circuit Court erred by failing to consider those potential contract defenses and to render a reasonableness finding. The Court remanded the case back to the Circuit Court to determine whether the contractual provision was enforceable and reasonable.

For those reasons, the Court of Appeals vacated the judgment of the Circuit Court and remanded the case.