Some much needed (and, some would argue, long overdue) protection for Ohio businesses has arrived in the form of an amendment to the provision of the Ohio Revised Code that shortens the statute of limitations on a written contract. The statute of limitations is the period of time in which a contracting party can sue for a breach of the contract. The amendment is of particular interest to the construction trades.

Every business in the construction trades enters into written contracts, but construction managers, general contractors and subcontractors, in particular, have been impacted by the fact that the obligations in those written contracts could extend 15 years or more after the project was completed. Effective September 28, 2012, the statute of limitations will be cut almost in half, from 15 to eight years. Ohio Rev. Code §2305.06.

The shorter limitations period should, over the next several years, reduce the overall number of contract-based lawsuits, primarily those that allege a long-ago breach of contract for what instead may constitute or reflect post-contract improvements in materials or methods, functional obsolescence, natural wear and tear, or poor maintenance. Those decade-old lawsuits can be impacted by, among other things, defunct entities, departed witnesses and missing records, thereby increasing costs and uncertainties.

Unlike most statutory amendments that apply only to claims arising in the future, the statute of limitations amendment is both forward and backward-looking. For this reason, the amendment will raise the question of when the limitations period does (or did) expire. The answer to that question could depend in part on the statute of repose for a “defective and unsafe condition of an improvement to real property,” which remains 10 years. A written contract may specify a shorter warranty or limitations period.

Under the amendment, for a cause of action that accrued before September 28, 2012 (the effective date of the amendment), the statute of limitations runs as of the earlier of (i) eight years from September 28, 2012, or (ii) the expiration of the limitations period in effect prior to the amendment.  For claims that accrued after the effective date of the amendment, the statute of limitations is eight years.  The bottom line is that contracting parties and their legal advisors must pay careful attention to when the applicable statute of limitations will (or did) expire.