Anyone who has reviewed the standard terms and conditions that accompany environmental consulting agreements is familiar with the various ways in which environmental consultants seek to limit their exposure to claims. These can include limitations on who may assert a claim, for how much, and within what timeframe. We advise clients retaining environmental consultants to review these terms carefully and to request modification of any unreasonable limitations, taking into consideration the scope and complexity of the project.

A recent decision from the Massachusetts Appeals Court reviewed one such limitation – specifically, a one-year time limit for bringing claims against the consultant – and ruled that it was unenforceable. The case, Shahin v. I.E.S., Inc., ____ Mass. App. Ct. ____ (May 31, 2013), involved a consulting agreement that limited the time in which claims could be brought against the consultant to one year from the date of the contract. The consulting agreement was signed in April 2006, the plaintiff received a notice of noncompliance relating to the work in question in July 2009 and then filed suit in December, 2010 – more than a year after both the contract date and receipt of the notice of noncompliance.

Although the trial court held that the contractual statute of limitations barred the plaintiff’s claims, the Appeals Court reversed, relying on a recent Massachusetts Supreme Judicial Court decision, Creative Playthings Franchise Corp. v. Reiser, 463 Mass. 758 (2012). That decision held that, while parties may contractually limit when claims may be brought, any such limitation must be reasonable. In Massachusetts, the so-called “discovery rule” applies to all statutes of limitation – if the plaintiff did not know, and could not through the exercise of due diligence have known, of the claim, the statute of limitations will be tolled. If a contractual limitations provision precludes the application of the discovery rule, it is invalid and unenforceable.

In the Shahin case, the Appeals Court ruled that the contractual limitation did not permit the discovery rule to operate for claims unknown and unknowable at the end of the one-year period, and accordingly invalidated the limitation. Importantly, the court not only refused to apply the one-year limitation from the date of the contract, but also from the date that the plaintiff first learned the existence of its claim. As a result, the six-year time limit in Mass. Gen. Laws c. 260, § 2 for contractual claims would apply. The ruling in this case applies to all contractual statutes of limitation, not just those in consulting agreements.

Even though liability limitations in consulting agreements are typically presented as “boilerplate,” they can have significant consequences in the unfortunate event that a client has to sue a consultant. Therefore, these provisions warrant careful review, and if necessary modification, to ensure that they are both legally valid and reasonable.