When is a contractual limitation period not a limitation period?

• United Kingdom

• Construction and engineering

01-12-2021

It is common practice to agree in a contract a deadline for claiming a breach. But if you have agreed a deadline, is it that simple? Rarely.

Why do limitation periods matter?

The Limitation Act 1980 sets deadlines within which claims must be started. If you are not mindful of these deadlines, rights can slip away without you knowing.

The statutory limitation period for a breach of contract claim is 6 years from the breach (12 years if signed as a deed).

Can these periods be varied?

Yes – you can agree your own deadlines which are shorter or longer than the statutory limitation periods.

BUT the words you use matter for your agreement to have the intended effect.

Altering the limitation period

Clear, express wording must be used to exclude the Limitation Act 1980. This means in most cases, a contractual limitation period will run in parallel to the statutory period – so it will shorten, but not extend, the limitation period.

In order to extend the limitation period, you would most likely need to expressly exclude the effect of the Limitation Act 1980, as well as stating your own agreed limitation period. Wording of this type has not yet been tested in the courts.

Worked example

Your contract includes the following term: “No action or proceedings may be brought or commenced under or in connection with this Contract at any time after the date 2 years after the completion of the Services.”

These deadlines will run in parallel:

• statutory deadline for breach of contract: 6 years from the breach
• contractual deadline: 2 years from completion of the services

So how does this work in practice? Let’s take 2 scenarios:

1.  

2.        

So if your contract includes a provision similar to the above, you need to bear in mind both the statutory and contractual limitation periods. Whichever expires first will effectively bar your claim for breach of contract.

I’ve already signed my contract – what’s the safest approach?

If there is any doubt about the limitation period under a contract, the safest approach is to assume the shortest deadline possible applies. That will be the shorter of:

• the date of the contract, plus 6/12 years (as appropriate) – the earliest date a contract can be breached is the date it is signed; and
• any express contractual limitation period