Contracts shortening Maryland's Statute of Limitations are not always enforceable.

You are free to make a contract that cuts short Maryland's Statute of Limitations. But it will not be automatically enforced against you.

Most lawsuits for breach of contract and negligence must be filed in court within three years of a breach. There are many situations where the three year period can be delayed or temporarily stopped, but that is a topic for another article. This piece will focus on contract language that cuts a three year limitation period to something shorter, usually one year.

Maryland will enforce contracts that cut back on your right to sue, from three years to something shorter. But a recent opinion from the highest appellate court makes clear that this contract term will not always be blindly enforced.

In Ceccone v. Carroll Home Services the parties litigated this issue. A home repair company sought to block claims for damage to the homeowner's furnace caused by its neglect. The homeowner made a claim within one year of the breakage, but failed to file the lawsuit within that same one year period. The service company defended by simply asserting "you're too late."

The trial court and the intermediate appellate court applied the long recognized Maryland law and enforced the shortened limitations as written in the contract. A judgment in favor of the home service company, which kicked the claim out of court, was affirmed. It took the homeowner's second level of appeal, to the Maryland Court of Appeals, to get the correct result.

The highest Maryland court instructed that:

A provision of a contract that purports to shorten this period of limitations will be enforced in Maryland only if (1) there is no controlling 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 assessing the reasonableness of such a provision, the court should make an explicit determination whether the provision is reasonable, considering a variety of factors, including the subject matter of the agreement, the degree to which the provision shortens the applicable period of limitations, the relative bargaining position of the parties, and whether the shortened period of limitations is one-sided or applies equally to the parties to the agreement. 

In the Ceccone case, the trial court did not weigh the three factors-- the judge just applied the contract language. The intermediate appellate court did a similar "rubber stamp" analysis to affirm the trial court. It did not matter that the contract only limited the homeowner to one year within which to file a lawsuit, while reserving to the service company all rights under the law. 

The Court of Appeals vacated the judgment in favor of the service company and sent the case back to the trial level for witness testimony and further consideration.  The new trial date shown in the on-line docket is November 2, 2017, in the Circuit Court for Anne Arundel County.

The surprising thing about the case is that the homeowners are representing themselves- only the service company has a lawyer--and the homeowners won the appeal after losing in two lower level courts. And even more surprising is that the case involves a dispute worth less than $4,000 and which has surely cost the service company many times more than the homeowner is claiming.

Operating without a lawyer, Mr. and Mrs. Ceccone obtained a reported opinion that will become part of Maryland's body of jurisprudence. That is more than many, many lawyers can claim!

As the Japanese proverb goes- "fall down seven times, but stand up eight." Kudos to Mr. and Mrs. Ceccone! 

Must I pay the real estate broker?

You've heard the story, and it goes like this-- "I had to back out of a real estate contract to sell my property, and now the broker is demanding that he get paid, what do I do?"

If you can't run to a phone and call us, here's the essential rule--a Maryland real estate broker is entitled to a commission upon his (or her) good faith procurement of a purchaser who becomes bound by a valid contract of sale. So, if the broker brings you a buyer, and the buyer signs, and the contract is now "live" and enforceable...you are on the hook to pay the broker, even if you never settle on that contract!

And as a general rule, especially in a very tight market, this is fair.  After all, most of the brokers I have met work pretty hard, and sacrifice quite a bit to make their deals work.

And it is not the broker's "fault" if you or the buyer cancel the deal, or one party defaults and refuses to close the deal.  In fact, this fact pattern describes at least six cases we've had in the last year.

You can avoid this result, of course, with the help of a lawyer.  You see, the statute is merely a legislative rule of construction.  It exists to supply a term of a contract that you and the other party simply forgot to include in the document, "when does the broker earn a fee?"

Our practice is to advise including contract terms that modify the default setting of the statute. You may agree that the broker's commission should only be paid from "proceeds of sale." That means you must settle on the deal before the broker is entitled to a fee. This also provides you with one more person motivated to help the deal along to completion!

Don't get caught by surprise! Read everything, and then have it all reviewed by a lawyer--before you sign!

Visit the Young & Valkenet website.