Contract & Money Periods
Breach of Contract
A six-year time limit applies for actions for breach of contract. Where the contract is executed under seal (more formally, as a deed) a 12-year time limit applies. The limitation period runs from the “accrual” of the action.
Accrual of an action for breach of contract takes place where there has been a breach. In the case of a contract, this may take place without the plaintiff having suffered damage. Damage is not a necessary element of a claim for breach of contract, although if may be a practical requirement in order to justify the commencement of legal proceedings.
This contrasts with the position in respect of negligence. Damages are a requirement for a claim in negligence. There is no claim, and the limitation period does not commence to run until there has been some loss, damage or injury. This contrasts with the positions where the claim is based on breach of contract, where the limitation period may commence before any loss or damage occurs.
Obligations by Deed
A 12-year time limit applies to certain contracts under seal. Certain legally significant documents, such as transfers of real property, were required to be made under seal at common law. The 2009 Conveyancing and Land Law Reform Act 2009 has substituted the requirement for sealing and delivery, with that of execution and delivery as a deed. This is a matter of intention. A witness is mandatory.
The actions must be based on a breach of a contract, which is itself under seal. The following actions are subject to a twelve years’ limitation period. They may not be taken t after the expiration of twelve years from the date on which the cause of action accrued:—
- an action upon an instrument under seal, other than an action upon an instrument under seal to recover
- an action to enforce an award, where the arbitration agreement is under seal;
- certain liability of company members to the company and each other constituted in the company’s constitution.
The 12-year period does not apply to arrears of rent, actions to recover
- arrears of rent;
- any principal sum of money secured by a mortgage or other charge, or
- arrears of interest in respect of any sum of money secured by a mortgage or other charge, or
- arrears of an annuity charged on personal property;
Monies Due
An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action. The following actions may not be brought after the expiration of twelve years from the date on which the cause of action accrued:
- an action upon an instrument under seal, other than an action upon an instrument under seal to recover arrears of a rentcharge or of a conventional rent, or any principal sum of money secured by a mortgage or other charge, or ) arrears of interest in respect of any sum of money secured by a mortgage or other charge, or arrears of an annuity charged on personal property;
- an action to enforce an award, where the arbitration agreement is under seal;
- an action to recover a debt created by certain debenture instrument
An action shall not be brought upon a judgment after the expiration of twelve years from the date on which the judgment became enforceable. No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due.
A “penalty” does not include a fine to which any person is liable on conviction of a criminal offence. An action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of two years from the date on which the cause of action accrued.
The above provision does not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief.
Accrual of Claim
A claim will accrue when every element necessary to succeed in the claim has taken place. Until then, by definition, there can be no claim. Questions of interpretation may arise as to when a cause of action has accrued.
There may be a non-fundamental breach of contract, such as where there has been a delay in performance which constitutes a breach of contract, where performance may still be possible. The other party may not yet be able to terminate and sue for breach of contract. In other cases, the claimant may have an option to terminate, but may not be obliged to do so. The limitations period does not commence until there is a right to bring a claim, but this may require a prior step by the claimant.
In the case of loans, the date of breach is a matter of interpretation. It is generally provided that the time limit runs from the date of demand of loan. If there is no set date for repayment, it is usually implied that the loan is repayable on demand. Commonly, it is expressly provided that repayment is made on demand. It is a matter of interpretation as to whether the demand is pre-conditional on a demand.
This issue may be significant in the context of forbearance on loans. There may be acknowledgements or part payment. However, a debt/loan may become statute barred if it is not repaid in a due date unless the repayment obligation is interpreted as requiring a prior demand.
Mortgaged Property
No action shall be brought to recover any principal sum of money secured by a mortgage or charge on land or personal property (other than a ship) after the expiration of twelve years from the date when the right to receive the money accrued.
The right to receive any principal sum of money secured by a mortgage or other charge shall, for the purposes of this section, be deemed not to accrue so long as the property subject to the mortgage or charge comprises any future interest or any life insurance policy which has not matured or been determined.
Various Financial Obligations
The same principle applies to bank accounts. A bank account in the part of a customer is a debt owed by the bank or financial institution. In accordance with general principles, the account is presumed to be payable on demand. Otherwise, bank accounts would often become statute-barred after six years, being a debt on the part of the lender.
Bills of exchange usually mature on a stated date. The date is usually fixed or ascertainable. A protest is required in the case of default in some case of default by non-payment or non-acceptance. Rights may be lost unless asserted promptly.
Guarantees are usually payable on demand. This is a matter of interpretation of the guarantee. The making of a formal demand is usually a condition of liability. It may, however, be a matter of interpretation whether liability arises automatically upon default. Most professionally drafted bank guarantees require a demand as a pre-condition of liability.
Insurance contracts, like other contracts of indemnity, usually accrue when there is a loss. Ultimately, that matter will depend on the true interpretation of the terms of the policy itself.
Restitution
A six-year time limit applies to claims in most areas of restitution. The general rule is that a claim based on quasi-contract is subject to a 6 year limitations period.
In some cases, the other considerations apply. Where the remedy sought is equitable in nature, the general principles applicable to those types of remedy apply.
Where remuneration falls to be decided in accordance with the restitutionary principles, liability generally arises once the works concerned are complete.