Black & LoBello

In Holcomb Condominium v. Stewart Venture, 129 Nev. Adv. Op. 18 (2013), the Court addressed an issue wherein the statute of limitations for a warranty claim against a builder may be reduced.  In the specific facts of the case, the statute at issue NRS 116.4116 provides that a 6 year statute of limitation exists for any warranty claims, BUT that statute also states that the length of limitations may be reduced to as little as two years by mutual agreement of the parties, in a document that is separate from other documents .  The Court found that an agreement to arbitrate which contained an agreement to reduce the time for the statute of limitations for warranty, was not a valid separate agreement because the arbitration agreement as a whole was incorporated into the purchase agreement for the property and was, therefore, not a separate agreement.

The Court could have stayed within the bounds of the statute at issue and simply determine whether the statute was met with the facts presented but instead took the opportunity to address the issue as to whether two parties could contractually modify a statutory limitations period generally and, therefore, creating new law in Nevada.  Sometimes the Supreme Court will use a related case to bring in an issue that may be yet undecided or unclear in Nevada, as they have done in this case.

The Court reiterated a previous holding that a public interest exists “in protecting the freedom of persons to contract”. Hansen v. Edwards, 83 Nev. 189, 192, 426 P.2d 792, 793 (1967), and went on to state that it joins several other jurisdictions in finding that a “party may contractually agree to a limitations period shorter than that provided by statute as long as there exists no statute to the contrary and the shortened period is reasonable, and subject to normal defenses including unconscionably and violation of public policy.” Holcomb at 8.  This apparently applies to ALL statutory limitations periods, UNLESS a statute exists that specifically states that it such limitation period cannot be shortened.

In short, a contract can contain language limiting a statutory period of claims, provided that  (1) No statute exists to the contrary, (2) the shortened period is reasonable, (3) normal defenses are not limited, (4) it is not unconscionable and (5) does not violate public policy.  The definitions of each of those requirements, other than (1), will most likely be litigatable issues.  -Steven Mack