Second Department Enforces Contract Term Shortening Statute of Limitations

On March 18, 2015, the Second Department issued a decision in State of Narrow Fabric, Inc. v. UNIFI, Inc., 2015 NY Slip Op. 02110, enforcing a contract term limiting the period in which to bring a claim relating to a sale of goods.

In State of Narrow Fabric, the trial court dismissed the plaintiff's breach of contract claims on statute of limitations grounds based on a contract term giving the plaintiff only one year in which to bring a claim rather than the four years provided by the UCC. The Second Department affirmed, explaining:

While UCC 2-725(1) generally provides that a cause of action alleging breach of a sales contract must be commenced within four years after it has accrued, that provision also allows the parties to a sales contract to reduce the period of limitation to not less than one year. Here, the defendants met their initial burden by demonstrating that their invoices containing the one-year limitation period constituted an acceptance that, together with the plaintiff's purchase order, was effective in forming a contract, and that the one-year limitation period, an additional term set forth in the invoices, was presumed to have become part of this contract between the parties unless one of the three exceptions in UCC 2-207(2) applied. It is undisputed that the plaintiff's action was not commenced within one year from the alleged breach, as required by the additional term. . . . .

Contrary to the plaintiff's contention, the abbreviated period of limitation was not against public policy. Absent proof that the contract is one of adhesion or the product of overreaching, or that the altered period is unreasonably short, the abbreviated period of limitation will be enforced. Where the party against which an abbreviated Statute of Limitations is sought to be enforced does not demonstrate duress, fraud, or misrepresentations in regard to its agreement to the shortened period, it is assumed that the term was voluntarily agreed to.

Here, the plaintiff failed to allege or demonstrate duress, fraud, or misrepresentations with respect to its agreement to the abbreviated period of limitations. Moreover, to the extent that the plaintiff relied on the doctrine of equitable estoppel, it did not allege any specific actions by the defendants that kept it from commencing this action within the contractual one-year period.

(Internal quotations and citations omitted).