Limitation in Commercial Disputes

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Business Dispute Resolution Article

09 March, 2022

Almost all commercial claims are subject to limitation. That is, in essence, the period of time by which court proceedings have to be issued following the accrual of the cause of action. If proceedings are not commenced by this deadline, then the case is at risk of being time-barred.

Limitation Periods

The law on limitation periods is governed by the Limitation Act 1980. This legislation sets out the main types of legal actions and the associated limitation period for each.

If a claim is brought beyond the limitation period, the defendant may be able to rely on the defence of the limitation to fully defend the claim. The burden of proof may then be on the claimant to prove that the time limit has not expired.

The relevant limitation periods in common types of commercial litigation cases are set out in the table below.

Cause of Action Time limit
Breach of Contract 6 years from the breach of contract

Tort (e.g. professional negligence)

6 years from the date the damage is suffered

Defamation or malicious falsehood

1 year from the date the defamatory or malicious statement was made
Action to Enforce a Judgment 6 years from the date on which the judgment becomes enforceable
Judicial Review Promptly and, in any event, within 3 months of the decision giving rise to judicial review

Special Considerations in Contract

For a simple breach of contract claim, the claim must be issued at Court within 6 years from the breach of contract. However, there may be variations to the limitation period depending on the following:

  1. Whether the contract is a deed;
  2. Breaches of warranty under a contract; and
  3. Where parties have agreed a standstill.

Deed

Where the contract is executed as a deed (also known as a 'speciality') any actions accruing under that deed attract a longer limitation period of 12 years from the breach.

Warranty

As part of entering into a contract, a party may have to provide assurances about factual matters under the contract. These are known as warranties.

Warranties may attract different limitation periods depending on the terms of the contract. Therefore, it is important to also consider the terms of any warranty clauses under the contract and any contractual limitation periods associated with them.

Special Considerations in Tort: Latent Damage

In claims arising out of negligence, the statutory limitation period is 6 years from the loss, save for the circumstances in which the damage suffered is not apparent or known about; also known as 'latent damage'.

In cases where there is latent damage, the core statutory limitation period can be extended to 3 years from the date when the claimant knows or ought to have known:

  1. The material facts about the loss suffered;
  2. The identity of the defendant; and
  3. The loss that was attributable in whole or in part to the act or omission which is alleged to constitute negligence.

In negligence cases, there is a 15 year long-stop date from the date of the defendant's negligent act or omission which caused loss.

Standstill Agreements

Parties may be able to suspend or extend the time in which they can make a claim by entering into a standstill agreement. The effect of a standstill agreement is to enter into a contractual arrangement with the other party that a limitation defence will not be used during an agreed 'standstill period' which would enable the parties to pass a statutory limitation deadline without that defence being raised.

However, standstill agreements are only temporary and usually can be ended on notice.

If you are involved in commercial litigation, it is important that you obtain legal advice as soon as possible, so that you don't fall foul of any potential limitation periods that apply.

For more information contact Stephen McArdle in our Business Dispute Resolution department via email or phone on 0333 207 1142. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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