The Time Limit to File a Breach of Contract Case is More Complex Than You May Think
Every lawsuit has a time limit, within which you must file your lawsuit, or it is forever barred. That is called a statute of limitations. When it comes to the statute of limitations with contracts, the statute of limitations seems clear, but there are factual scenarios that can make the time limit more confusing than you may think.
Five Years…for Some Contracts
The statute of limitations to file a breach of contract action is five years.
Except that’s just for written contracts. For oral agreements—which, absent some specific circumstances, are generally enforceable—the statute of limitations to enforce the contract is only 4 years. And if you’re asking the court to order a party to specifically comply with the terms of the contract (that is, you are seeking specific performance, not just monetary damages), that tie limit goes down to only one year.
When Does Time Start?
But when does that five year “clock” start? That’s a tougher question to answer.
The clock starts at the time the contract is breached. If the contract is for a one time performance—say, painting of a building, or the building of an item—it should be generally easy to know when that breach actually happens.
The problem is that many contracts are performed in stages—that can be stages to the performance, or stages (that is, installments), to payment. The clock starts to tick on the first breach of the contractual installments.
That means that it is possible for a lawsuit to be filed in 6 or 7 years, and because some breaches fall outside of (before), and some inside of the statute of limitations, the party suing may not be able to collect all of its damages.
Tolling and Pausing the Clock
Making matters more complex, some actions can stall (toll) the statute of limitations. This often happens with partial payments that are made in debtor-creditor contracts. A partial payment will pause the statute of limitations. To actually pause the limitations period, the partial payment must be accepted by the party being paid.
A creditor can argue that tolling occurs when the borrower or the other side to the contract cannot be found. This doesn’t mean just an inability to speak with the other side. This is for situations where the other side to the contract moves away, or changes phone numbers or addresses, or takes steps to avoid being found at all.
New Contracts, New Deadlines
In some cases, the parties may actually create a second contract, renewing or restarting the statute of limitations.
Imagine someone is supposed to build a structure, and misses the deadlines. 1 year later, the parties agree to an extension, and new terms. That second agreement may be considered a new agreement—now the statute of limitations is five years from that subsequent agreement (which is actually six years after the original agreement).
Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help making sure your lawsuit is filed on time, so you don’t lose out on your legal claim.