Contracting Parties May Not Shorten the Statute of Limitations for Unfair and Deceptive Trade Practices Claims

By Tess S. R. Diven and Andrew Atkins

The North Carolina Court of Appeals has effectively ruled that parties cannot contractually agree to shorten the four-year statutory limitations period under the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”). In Warren v. Cielo Ventures, Inc., No. COA22-926 (May 7, 2024), the Court of Appeals determined that the one-year limitations period in a remediation contractor’s contract was invalid, at least to the extent it purported to limit UDTPA claims. 

The contract in question was a work authorization agreement between a remediation contractor and homeowners whose home had suffered substantial damage due to a water heater leak. The initial inspection revealed extensive water damage requiring repair work to start immediately. The homeowners and the contractor entered into an “Authorization to Perform Services and Direction of Payment” agreement, which included the following provision:

NO ACTION, REGARDLESS OF FORM, RELATING TO THE SUBJECT MATTER OF THIS CONTRACT MAY BE BROUGHT MORE THAN ONE (1) YEAR AFTER THE CLAIMING PARTY KNEW OR SHOULD HAVE KNOWN OF THE CAUSE OF ACTION.

Roughly 10 days later, the homeowner visited the house and discovered that the contractor had completed little to no repair work. It was later discovered that the contractor was preoccupied by another project. Unsurprisingly, the water damage resulted in mold spreading throughout the house. The homeowners hired another company to repair the worsening damage, but the mold proved relentless. Ultimately, a certified industrial hygienist determined that the mold was beyond possible repair and the home was consequently demolished. The insurance company compensated the homeowners for the loss.

Just shy of four years later, in July 2021, the homeowners filed a claim against the remediation contractor under North Carolina’s UDTPA. Arguing the homeowner’s claim was time barred by the one-year contractual limitation provision, the contractor was granted summary judgement by the trial court. On appeal, the Court of Appeals defined the issue as being not one of fact but of law—whether parties can validly contract to reduce the four-year statute of limitations period for UDTPA claims to one year. While the court acknowledged that North Carolina has allowed parties to contractually shorten limitations periods in some cases, the legislative purpose of the UDTPA to protect consumers from unfair and bad faith dealings weighed heavier for this three-judge panel. Interestingly, the Court of Appeals states that based on its reasoning, it “will not construe the generalized one-year clause of limitations” to bar the homeowners’ UDTPA claims. (emphasis added). Wordsmiths may see this as an opening to test the limits of this potentially broad ruling by drafting a contract provision reducing the limitations period for UDTPA claims specifically. Otherwise, under this ruling, North Carolina parties cannot contractually reduce the four-year limitations period applied to UDTPA claims.

If you have any questions, please contact Tess S. R. Diven, Andrew Atkins or the Smith Anderson lawyer with whom you normally work.