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Statutes of repose serve to cut off a right of action by establishing a date by which the action no longer exists. The action is cut off regardless of whether the action has accrued by that date or not. Arkansas’ Statute of Repose includes the following provision:

“(a) No action in contract, whether oral or written, sealed or unsealed, to recover damages caused by any deficiency in the design, planning, supervision, or observation of construction or the construction and repair of any improvement to real property or for injury to real or personal property caused by such deficiency, shall be brought against any person performing or furnishing the design, planning, supervision, or observation of construction or the construction or repair of the improvement more than five (5) years after substantial completion of the improvement.”

Ark. Code Ann. § 16-56-112 (a).

A plain reading of this provision reveals a claim concerning damage to real or personal property arising from a contract is barred when it arises more than five (5) years after substantial completion of the improvement to the property. Although this portion of the statute refers only to actions in contract, the Arkansas Supreme Court has held it applies to tort claims as well.

In Okla Homer Smith Furniture Mfg. Co. v. Larson & Wear, Inc., 278 Ark. 467 (1983), the Arkansas Supreme Court found the language “in contract” also includes torts. In Okla Homer v. Larson & Wear, a general contractor agreed to construct an addition to a factory. The roofing work was subcontracted and completed in 1974. A storm on April 2, 1980, then caused damage to the factory that was alleged to be the result of negligent design, fabrication, and installation of the roof. Suit was filed on June 30, 1981. Defendants argued that the five-year limitation period barred suit.  Plaintiff argued the statute in sub-section (a) refers to “actions in contract” and sub-section (b) refers to actions “in tort or contract” (related to personal injury or wrongful death). Leaving open the possibility an action for property damage alleging negligence rather than contract could be brought more than five (5) years after substantial completion. This possibility was based on the only governing statute of limitation being that for tort claims, which provides a 3-year period for filing suit after a cause of action accrues. Plaintiff argued the damage at issue did not occur until the storm of April 2, 1980, and suit was filed well within the three (3) year statute of limitations Plaintiff contended applied.

The Arkansas Supreme Court held the language “in contract” in sub-section (a) was not limited to actions where the plaintiff alleged recovery in contract but also applied to actions where property damages were caused by tort (i.e., where there was negligent design, planning, supervision or observation of construction). The Arkansas Supreme Court drew an analogy to prior precedent where it had indicated the “real character” of an action for negligent performance of a construction contract was “in contract” rather than “in tort.” The Arkansas Supreme Court also found support in the language of the preamble of the statute, which indicated the statute’s purpose was to establish a statute of limitation for any deficiency in work arising out of a construction contract. The Arkansas Supreme Court ultimately rejected Plaintiff’s argument the general tort statute of limitation was applicable and applied Section 16-56-112(a)’s 5-year limitation dating from substantial completion of performance—on the basis the phrase “in contract” as used in the statute includes “tort.”

The Arkansas Supreme Court’s interpretation of § 16-56-112(a) adds a layer of protection for professionals engaged in construction projects in Arkansas. The decision in Okla Homer v. Larson & Wear also serves as an important reminder that judicial interpretation of a statute requires more than a straightforward reading of the text of a statute.