January 1, 1900

The design/build method is becoming an increasingly popular method of construction. On a design/build project, a single entity is responsible for providing both the design and construction services, as opposed to the owner separately contracting with a design professional and a general contractor. This method is commonly utilized with the expectation of shortening the duration of the project, reducing overall project costs and eliminating the potential for disputes over design errors or omissions. However, the design/build method may also serve to toll the repose period for actions arising out of negligent design.

"It is important that design professionals be aware of the effect that specific forms of contracts may have on the way they conduct business."

What Is The Repose Period?

The Statute of Repose, as set forth in N.J.S.A. 2A:14-1.1, establishes a ten-year limitations period on any claim arising out of a defect in improvement to real property in an action against any person who designed, planned, supervised or constructed the improvement. Typically, with respect to architects and engineers who provide design services only, and are not involved with the supervision or management of the project, the period of repose begins ten years and one day after the design professional's plans are delivered to and accepted by the contracting party. Simply stated, when a design professional rendered services on a particular job for which the work was accepted, such professional person could look back ten years and one day after the performance or furnishing of such services and know there was repose from liability.

However, with design/build contracts, the repose period with respect to the design begins to run when the project has been substantially completed. This typically occurs when the certificate of occupancy has been issued, and the structure is capable of being used for its intended purpose.

The Tolling Effect

Occasionally, a situation arises where a claimant brings a negligent design cause of action when the design phase of the project occurred more than ten years prior to the injury, but where the project had been substantially completed for a period of less than ten years. A situation such as this is not unusual, especially given the fact that with large projects, the design phase may occur months or years prior to the commencement of construction.

For example, a lawsuit may be initiated against a design professional, who was responsible for both the design and construction of a particular project, whereby it is alleged that the injury originated during the design stage. There is no claim arising out of the construction phase other than adherence to the allegedly defective design; however the design was created more than ten years before the filing of the Complaint, while the construction of the project was completed less than ten years from the same filing date. In a situation such as this, the Court would be compelled to find that the completion of the design stage alone, during which the defect originated, is insufficient to immunize the design professional under a "design/build" contract even though it occurred beyond the ten-year period. See, Welch v. Engineers, Inc. (1985).

In sum, the critical date with respect to the Statute of Repose and claims based upon negligent design, where a design/build method of construction has been utilized, is ten years after the performance or furnishing of services and construction for the entire project which is undertaken. The court will not break the project down into stages for the benefit of the designer/general contractor.

It is important that design professionals be aware of the effect that specific forms of contracts may have on the way they conduct business. When entering into any form of contractual relationship, the design professional may wish to seek the advice and assistance of legal counsel for the purpose of formulating provisions that express their specific intent and that provide them with the applicable statutory safeguards.

William J. Healy is an associate of Hill Wallack where he is a member of the Litigation Division and the Construction Industry Practice Group. He concentrates his practice in the representation of architects, engineers and design professionals and their professional liability insurance carriers.