Contracts & the Statute of Limitations
Statutes of limitations are an important aspect of European and U.S. law. These statutes prevent fraudulent and outdated lawsuits from arising. When conducting business it is important to understand statutes of limitations, especially in contracts for a sale. This knowledge will allow you to take the proper legal recourse in the case of a breach of contract.
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What is Staute of Limitations?
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Statute of limitations is the maximum time after an event that a lawsuit can be initiated in relation to that event. Now an essential part of the European and U.S. legal systems, statutes of limitations date back to early Roman law. The defendant of a court case generally asserts the statute of limitations as a defense. This is an attempt to defeat an action brought against the defendant after the statute of limitations has passed.
Staute of Limitations for Contracts
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The statute of limitations for contracts vary depending upon the type of contract. Also, statutes of limitations vary from state to state, depending on whether the case has been filed in federal or state court. There are also separate rules for each type of breached contract. Some of the the most commonly breached contracts are debt and sale of goods or services. Generally, statutes of limitations for contracts is governed by the Uniform Commercial Code (UCC). However, many states have employed their own stricter statutes for different types of contracts. Under certain circumstances the statute of limitations can be tolled, which means to extend the time limit.
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Tolling
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Tolling in regard to statute of limitations means to extend the time allotted to bring a lawsuit. This is available under certain circumstances. One of the most common reasons for tolling is lack of legal capacity. However, mere ignorance of breach generally does not provide enough reason for tolling the statute of limitations. A debt may be tolled by an unconditional promise to pay or an acknowledgment of the debt. The amount of time extended is determined under the promise.
Contracts for Sale
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It is important for businesses involving sales of goods or services to be aware of the statute of limitations regarding contracts for sale.These statutes of limitations are governed by Section 2-725 in Article 2 of the UCC. According to the UCC, legal action regarding breach of contract for sale must start within four years after the cause of action. However, this section of the UCC does not alter the rules regarding tolling.
Debt Collection
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A breach of contract for debt collection can vary widely from state to state. The time limit may also vary according to the classification of each debt. In addition, each state classifies debt differently. In California the statute of limitations is four years for a written agreement and two years for an oral agreement, according to Fair Debt Collection. While in Connecticut the statute of limitations is six years for a written contract and three years for an oral contract. In contrast, District of Columbia classifies debt into three different categories: an open or credit card account, contracts under seal, and UCC sales of goods. Each have different statutes of limitations under District of Columbia law. You should consult a legal professional to determine the statute of limitations in your state for your particular case.
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References
- Photo Credit signing a contract image by William Berry from Fotolia.com
