In a recent California Appellate Court decision, Brisbane Lodging, L.P. v. Webcor Builders, L.P. 216 Cal. App. 4th 1249 (2013), the Court upheld a clause in a construction contract that shortened the statute of limitations and abrogated California’s delayed discovery rule as to latent defects. This decision was a case of first impression in the state and is bound to have significant implications for contractors, owners and developers in drafting their construction contracts.

The Facts in Brisbane
Brisbane Lodging, L.P. and Webcor Builders, Inc. entered into a contract for the design and construction of a large hotel. The AIA contract1 used by the parties modi ed California’s applicable statute of limitations with respect to claims between Brisbane and Webcor. Article 13.7.1.1 provided that the time in which to bring any causes of action began to run at substantial completion: “any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than such date of Substantial Completion.” The hotel was substantially completed on July 31, 2000.

In 2005, a break in an underground sewer line caused wastewater to ow under the hotel. Webcor admitted that the problem was caused by a latent plumbing defect and made some remedial repairs. When the problem reoccurred, Brisbane discovered that the plumbing contractor had constructed the sewer line with ABS pipe material rather than cast iron pipe, contrary to the requirements of the Uniform Plumbing Code.

In response to Brisbane’s complaint for breach of contract, negligence, and breach of implied and express warranties, Webcor moved for summary judgment on the grounds that the suit was barred by the contractual limitations period provided for in Article 13.7.1.1 of the parties’ construction contract. The trial court agreed with Webcor and granted summary judgment. Brisbane appealed.