What Is the Statute of Limitations on A Breach of Contract Claim For Non-Payment?
It’s a long time to wait to get paid, but a new Northern District decision has held that the 10-year Statute of Limitations contained at 735 ILCS 5/13-206 governs an engineer’s claim for non-payment of invoices issued pursuant to work performed under a contract.
It’s a debate you may see quite often for construction work given that there is a separate statute in this state that applies a four-year statute of limitations for claims based on many acts or omissions in construction work:
“(a) Actions based upon tort, contract or otherwise against any person for an act or omission of such person in the design, planning, supervision, observation or management of construction, or construction of an improvement to real property shall be commenced within 4 years from the time the person bringing an action, or his or her privity, knew or should reasonably have known of such act or omission. Notwithstanding any other provision of law, contract actions against a surety on a payment or performance bond shall be commenced, if at all, within the same time limitation applicable to the bond principal.” 735 ILCS 5/13-214(a).
But that statute does not apply to claims made by a design professional for the owner’s breach of contract by failing to pay invoices.
In Burbach Aquatics, Inc. v. City of Elgin (N.D. Il. Doc. No. 98 CV 4061) an engineer brought a breach of contract action against the City of Elgin for the City’s failure to pay invoices it issued for work it performed under the contract. The complaint can be found here and a copy of a modified 1985 AIA B141 entered into in 1995 between the City and the engineer is attached.
Pursuant to the contract, Burbach alleges that it rendered services for the renovation/replacement of municipal swimming pools and bathhouses owned by the City.
The work was performed and on June 13, 2001; August 9, 2001; and July 2, 2002, the engineer issued invoices for the work. Section 11.5.2 of the contract stated that the invoices were due and payable 20 days from the date on the invoices.
The complaint alleges that Elgin never paid the invoices and on July 17, 2008, Burbach brought suit to collect the $135,559.72 owed under the contract along with the interest owed at 18% per section 11.5.2. (That’s $24,400.75 per year in interest and over the six years is $146,404.50 in interest – more than the amount owed on the contract.) No claim was also brought for the additional interest that also might be owed this engineer under the Local Government Prompt Payment Act (50 ILCS 505/1).
The City filed a motion to dismiss the case saying that the four-year statute of limitations applied and that even if the 10-year statute applied it ran in 2005 because the contract was signed in 1995.
The court disagreed and issued this opinion. In the opinion, the court found that the activity complained of by Burbach giving rise to the breach of contract action was the City’s failure to pay the invoices, and not an activity enumerated in the 13-214 statute. The court cited to two familiar cases, Prate v. Thomas, and Paschen v. Kankakee, both cases involved a breach of contract claim for the failure to pay a contractor for work performed under a contract, where the 13-214 statute was found inapplicable, and held that the 13-206, 10-year statute of limitations applied.
The Court also held that the claims did not arise until 20 days after the date on the invoice since that was how long the City had to pay the invoice and it breached its contract when it failed to do so. The statute of limitations would not expire until 10-years from the 20-day date.
This is yet another reminder that paying attention to these dates in the contracting process, as well as having a decent percentage fee for failure to pay can amount to, as here, a hefty sum if the failure goes on long enough and decreasing the amount of interest may be in the best interest of others.
