Understanding the Limitation Period in a contractual dispute is fundamental to ensure that your potential claim is not time barred (unable to be brought due to being out of time to commence proceedings). This article will elaborate on limitation periods, with a particular focus on contractual disputes.
Before we delve deeper into limitation periods, you will firstly need to understand exactly what they are. Quite simply, a limitation period is the timeframe in which a Claimant is able to commence proceedings/bring a claim. Allowing the limitation period to expire often results in the Claimant being precluded from bringing a claim altogether.
The purpose of limitation periods is to allow the Claimant to have a fair timeframe to investigate their potential claim, comply with the necessary pre-action steps and ultimately issue proceedings at court. From the Defendant’s perspective, they offer protection by preventing them from having to defend outdated and stale proceedings, where invariably the knowledge and recollection of witnesses fades over time.
Time will start to run from the moment the essential components of a claim are in place, referred to as the date of accrual. For contractual claims or disputes, the components are in place from the point the contract is breached, regardless of whether the Claimant is aware that there has been a breach or independent of any loss or damage having been suffered.
The clock will stop running for limitation purposes from when the claim is brought, typically when the court issues a Claim Form.
The general position in contractual disputes is that there is a six-year limitation period, running from the date of the breach of a simple contract. This includes a majority of agreements between parties, be that agreements that are made orally or in writing or expressly or impliedly. A point of note is that if a contract is a deed (referred to as a “specialty contract”) then the limitation period is twelve years from the date of breach of the specialty contract.
For anticipatory breaches, which arise when one of the parties to a contract indicates, by words or conduct, that it cannot and/or does not intend to perform some or all of its obligations, limitation will run, if the non-breaching party elects to terminate the contract immediately, from the date of acceptance of the repudiatory breach by the non-breaching party. Where the non-breaching party decides to wait for the time of performance then, providing they are still ready and able to perform their obligations, time will run from the point at which the breaching party’s obligation was due to be performed.
For non-payment of goods or services claims, case law has established that the limitation period commences when the goods are provided or when the services are actually performed.
In construction claims, case law has indicated that the limitation period typically starts when practical (or substantial) completion is achieved.
It goes without saying that the first thing you should consider is when the limitation date accrues. This is not a simple exercise and an ordinary lay person may mistakenly identify an incorrect accrual date. Solicitors within our Dispute Resolution team would be able to assist with identifying the correct date.
A more formal arrangement is for parties to enter into what is known as a “standstill agreement” to either suspend the running of time or to extend the limitation period. The function of these agreements are to allow for parties to investigate, negotiate or comply with an appropriate pre-action protocol.
If expiry of limitation is fast approaching and parties have not managed to agree a pause or extension to limitation, the Claimant would be wise to consider issuing proceedings “protectively”. This method will stop the limitation clock altogether. The Claim Form will need to be served but not immediately – the Claimant has four months from the date of issue to do so, allowing plenty of time for investigation and compliance with the pre-action protocols.
Hopefully, this article illustrates the complexity of limitation periods and the vitalness of getting an accrual date correct. A member of Warners’ Dispute Resolution team would be more than willing to assist in reviewing any potential claim you may have. For more information, please contact the team on 01732 747900 or [email protected]
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published. We do not accept responsibility or liability for any actions taken based on the information in this article.
