Period of limitations: Overview, definition, and example
What is the period of limitations?
The period of limitations refers to the legally defined time frame during which a party can bring a lawsuit, claim, or legal action arising from a contract, tort, or other obligation. Once the period of limitations has expired, the party loses the legal right to pursue the claim. The duration of the period depends on the jurisdiction, type of claim, and applicable laws or agreements.
For example, a contract dispute may have a period of limitations of four years under the governing state’s laws, meaning any claims must be filed within four years of the alleged breach.
Why is the period of limitations important?
The period of limitations is important because it provides certainty and finality to legal matters, ensuring that claims are brought within a reasonable time. This helps protect parties from indefinite liability and ensures evidence and witnesses remain available and reliable.
For claimants, it emphasizes the importance of acting promptly to assert their rights. For defendants, it limits the period during which they can be exposed to potential lawsuits, providing clarity and stability.
Understanding the period of limitations through an example
Imagine a company enters into a sales agreement with a supplier. The agreement specifies a period of limitations of three years for breach of contract claims. If the supplier delivers defective goods, the company must file its claim within three years of the delivery date. If it fails to do so, the claim is barred by the expiration of the limitations period.
In another example, a homeowner hires a contractor to remodel their home. The applicable state law sets a six-year period of limitations for construction defect claims. If the homeowner discovers defects five years later, they can still pursue legal action. However, if they wait until the seventh year, the contractor can invoke the expired limitations period as a defense.
An example of a period of limitations clause
Here’s how a period of limitations clause might appear in an agreement:
“Any claim, action, or proceeding arising out of or relating to this Agreement must be commenced within [number] years after the cause of action accrues. The Parties expressly waive any longer period of limitations provided by applicable law unless otherwise prohibited by statute.”
Conclusion
The period of limitations ensures fairness and predictability in legal matters by setting clear timeframes for filing claims. For businesses, it limits exposure to prolonged legal liability and provides a timeline for resolving disputes. For claimants, it underscores the importance of acting promptly to assert their rights. Including a well-defined period of limitations clause in agreements helps clarify expectations, reduce disputes, and align with applicable legal frameworks.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.