Real Property Notes Blog
One Year Limitation on Lawsuits in Purchase Agreement Upheld
In Fortune v Walsworth, an unpublished Michigan Court of Appeals opinion, the parties entered into a purchase agreement for residential property. The agreement contained a provision whereby the parties agreed that “any legl action against either party … arising out of the provisions of this Agreement … must be brought within the shorter of (a) the time provided by laws or (b) one (1) year after the Closing, or be forever barred.” Over two years after the closing, the purchaser sued the seller, making claims of breach of contract, fraudulent misrepresentation, unjust enrichment, and quantum meruit. The trial court dismissed the proceeding based upon the one-year limitation in the agreement and the Plaintiff appealed.
On appeal, the court noted that the limitation was akin to a statute of repose, which prevents a cause of action from ever accruing when the injury is sustained after the designated period has passed. The court noted that Michigan law allows the parties to contract for a period of time shorter than the statute of limitations and, regardless of the type of claim alleged, the contractual period of repose bars all claims if not brought within the agreed-upon time.
The statute of limitations in Michigan is six years for both breach of contract and for fraud. Parties would do well to include a period of repose shorter than the statute in all contracts.