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Thursday, August 22, 2019

Md. court to decide if company can shorten statute of limitations with provision in consumer contracts

By Sara McCleary | Aug 14, 2017

ANNAPOLIS, Md. (Legal Newsline) – The Maryland Court of Appeals has told a trial court to determine whether a provision in a contract that shortened the statute of limitations during which a lawsuit could be brought is enforceable.

On July 28, Maryland's highest court ruled that such a provision could be enforceable only if there is no statute to the contrary, it is not the product of fraud or misrepresentation and is reasonable. In doing so, it sent a lawsuit against a home services company back to the Circuit Court for Anne Arundel County after that court had previously dismissed it.

Richard and Daphne Ceccone filed a pro se small claims complaint on Dec. 24, 2015, against Carroll Home Services (CHS). The couple alleged they had entered into an agreement with CHS to have the company maintain their furnace. 

According to the appellate court’s decision, written by Judge Robert McDonald, an incident occurred in April 2014 involving the couple’s furnace, resulting in damage to their home. Consultations with an engineer, insurance adjuster and a different furnace maintenance company confirmed that the problem was caused by the actions of CHS.

The Ceccones contacted CHS, asking it to pay for the damage, and the two parties negotiated throughout 2015, but no agreement was reached. The couple ultimately filed their small claims action for $3,694.39.

That case was dismissed by the district court on March 17, 2016, because of a clause in the general terms and conditions agreed to by the Ceccones that shortens the period of limitations in which action can be taken to one year - instead of the normal three.

CHS argued to the district court that the Ceccones knew they had a potential claim in October 2014 but didn’t file their complaint until December 2015, beyond the one-year limit set out in their contract. That court decided in CHS’s favor and the Ceccones appealed.

In considering the case, the Court of Appeals asserted that such contractually shortened limitation periods can only be enforced if three conditions are met. McDonald sets out the three conditions in his written opinion as “(1) there is no statute to the contrary; (2) the provision is not the result of fraud, duress, misrepresentation, or the like; and (3) the provision is reasonable in light of all pertinent circumstances.”

The appellate court accepted that it is not aware of any statute preventing a home services company from including a provision shortening limitation periods, but instructed the circuit court to reconsider the provision keeping in mind the other two conditions.

“With respect to the second question, the Ceccones have not asserted duress. They have alleged, however, that CHS made misrepresentations that they felt were material and that amounted to fraud and complained about an alleged failure of CHS to respond to discovery on the subject,” writes McDonald. 

“It appears from the record in this case that the circuit court did not evaluate those allegations in assessing the limitations provision in the contract.”

McDonald goes on to point out that the circuit court also failed to assess the reasonableness of the provision. 

“On remand, the circuit court should… explicitly determine whether the shortened limitations period is reasonable. In doing so, the court should consider the totality of the circumstances,” he writes.

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Maryland Court of Appeals