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What is the Statute of Limitations for Breach of Contract Actions?

In every state, different legal claims have different statutes of limitations. Additionally, some case types can have different statute of limitations depending on the facts of the case. A statute of limitations is a law that lays out how long a person has to bring a lawsuit after an event occurs.

Statutes of limitations are extremely important and can make or break a case. It is a matter of procedure that all lawyers or individuals filing a case should research before moving forward. If a person does not bring a lawsuit within the set time period, they may lose their right to do so forever. This is a mistake that can be easily avoided by keeping informed about your state’s applicable law.

For example, say a person is injured in a car accident caused by the other driver. In most situations, the statute of limitations for this type of case is 2 years. If the person files a lawsuit against the other driver 2 years and 1 day after the accident happened, the statute of limitations will have run and that person will be prohibited from bringing that case.

Statute of Limitations Definition

Statute of limitations is a legal term used to describe state statutes that specify the amount of time a plaintiff has to file a civil lawsuit or the amount of time a prosecutor has to file a criminal complaint against a defendant.

The statute of limitations serves to place a limit on the plaintiff by establishing a deadline for filing their lawsuit; if enough time has passed, the plaintiff or criminal prosecutor is barred from bringing their case against the defendant.

The deadline for filing a lawsuit varies depending on the type of suit being filed and the applicable state statutes where the plaintiff is filing the lawsuit.

Why Do States Have Statute of Limitations?

As noted above, one purpose of statute of limitations is to protect defendants from untimely litigation. Statute of limitations allow plaintiffs to pursue valid claims against defendants, but only when the plaintiffs exercise due diligence in timely filing the claims.

Once again, what is considered a timely filing of a claim will depend on the state where the claim is being filed and the type of claim being filed. For example, in the state of Texas, a normal statute of limitations for a plaintiff to file a civil lawsuit is two years from the date of the incident.

There are three main reasons why the law enacts statutes of limitations:

  1. The statute forces a plaintiff with a valid cause of action to bring the claim timely;
  2. Bringing a claim untimely may result in the loss of evidence by a defendant necessary to defend themselves against the claim; and
  3. Litigation of a long-dormant claim may result in more cruelty than justice.

When Does Time Begin to Run on Statute of Limitations?

The United States Supreme Court has indicated many times that the standard rule is that the statute of limitations begins to run ‚Äúwhen the plaintiff has a complete and present cause of action.‚ÄĚ The statute of limitations typically begins when the harmful event, such as the crime or injury occurs, or when the plaintiff discovers the injury, such as in cases of fraud.

If a lawsuit is commenced after the statute of limitations, then the claim will likely be thrown out of the court with a simple motion from the defendant. However, in some cases the clock may have been paused for a period of time; this is known as ‚Äútolling the limitations.‚ÄĚ

For example, in criminal cases where the defendant commits a crime and flees, which results in them becoming a fugitive of the state, the state will then suspend the statute of limitations for the period of time that the fugitive was on the run.

This means that the prosecutor will be able to bring the criminal charges forward, once the fugitive is caught, not counting the time spent on the run. Additionally, in cases where plaintiff is a minor, meaning they were under the age of 18 at the time, many states allow tolling of the statute until the plaintiff reaches the majority age of 18. 

Further, it is even possible in cases of private civil matters for the statute of limitations to be shortened or lengthened by an agreement of both of the parties.

Where Can I Find the Statute of Limitations?

A statute of limitations is first and foremost a statute, meaning it is a state law. This means that the statute of limitations is usually found in the state statute for the claim you are seeking to file, and these can be easily found online. For instance in personal injury cases, if you are seeking to file a negligence complaint related to a car accident, then you should look under the common law negligence statute for your state.

Within the common law negligence state statute, there will be a section entitled ‚Äústatute of limitations,‚ÄĚ which will contain the amount of time plaintiff will have to file their claims; this will usually be notated in a term of years (two years, four years, five years, etc.).¬†

The statute may also define when the statute of limitations begins running, which is useful in calculating whether the statute of limitation has indeed ran, or if you still have time to file a claim due to the tolling of the statute.

What is Breach of Contract?

To understand when a specific statute of limitation applies, you first need to be familiar with the elements of different causes of action. To qualify as a breach of contract, generally the following things need to occur:

  • A contract needs to be formed between two or more parties. This revolves around promises made between the parties and can be oral or written, depending on the type of contract;
  • One party fails to fulfill their duties under the contract. For example, if there is a sales contract and the buyer does not pay for the goods received, this would be a breach of the contract; and
  • The other party is damaged in some way by the breach.

After a breach occurs and it is not remedied, the injured party can choose to file a lawsuit. The complaint will need to be filed within your state’s statute of limitations time period.

 

Can Statute of Limitations Vary for Different Breach of Contract Actions?

For breach of contract actions, the statute of limitations time periods vary widely between the states. Currently, they range from 3 to 15 years. Generally speaking, most states have longer statutes of limitations for written contracts, and shorter statutes of limitations for oral contracts. However, some states give a person the same time to file for both types of contract.

In general, the statute of limitations for contract claims begins to ‚Äúrun‚ÄĚ (the clock starts ticking), once the facts that give rise to an action on the contract, such as breach or grounds for rescission, come into being. It usually does not matter when the party actually discovers the action.

Below is a chart of each state’s statute of limitations. This covers both written and oral contracts. However, please note that the information below is a general guide as these numbers can change. If you are thinking about filing a breach of contract action, you should double check your state’s current statute of limitations for the most up to date information. Hiring a lawyer to help you with this would also be helpful.

What is a Breach of Contract, and What are the Different Types of Breaches?

A contract is a legally binding promise made between two parties. Each party to a contract promises to perform a certain duty, or pay a certain amount for a specified item or service. The purpose of a contract being legally binding is so each party will have legal recourse in the event of a breach.

A breach of contract occurs when the promise of the contract is not kept, because one party has failed to fulfill their agreed upon obligations, according to the terms of the contract. Breaching can occur when one party fails to deliver in the appropriate time frame, does not meet the terms of the agreement, or fails perform at all.

Further, if one party fails to perform while the other party fulfills their obligations, the performing party is entitled to legal remedies for breach of contract.

There are four main types of contract breaches:

What Is a Minor Breach?

A minor breach occurs when a party to the contract fails to perform a part of a contract. The failure is so small and and of such a nonessential part that all parties can otherwise fulfill any remaining contractual obligations.

Can I Sue for a Minor Breach?

Yes. The non-breaching party may sue for a minor breach. The lawsuit must be for any damages that was caused by the failure to perform the minor detail.

Do I Have to Complete Performance If the Breach Was Minor?

Yes. A minor breach requires all parties to complete their obligated performance, or non-performance, of the contract. The only time a party does not have to perform its part of the contract is when a material breach occurs. The non-breaching party in a material breach is freed from any obligation to complete their part of the contract and can sue for damages.

How Is a Minor Breach Different from a Material Breach?

A material breach fundamentally breaks the agreement because the breaching party fails to fulfill an important part of the contract or otherwise makes it impossible for the contract to be completed. A minor breach is less serious because it does not prohibit the parties from satisfactorily completing the rest of the contract. For example, a homeowner hires an electrician to install a lighting system with a specific brand of wiring. If the electrician fails to install the lighting system, it is a material breach. If the electrician installs the lighting, but uses a different brand of wiring than the brand requested, it is a minor breach.

Material Breach: A material breach of contract is a breach that is so substantial, it seriously impairs the contract as a whole; additionally, the purpose of the agreement must be rendered completely defeated by the breach. This is sometimes referred to as a total breach. It allows for the performing party to disregard their contractual obligations, and to go to court in order to collect damages from the breaching party;

What is a Material and Non-Material Breach of a Contract?

In contract law, the two major types of breach of contract claims are a material breach of a contract and a non-material breach.

A non-material breach is a minor breach. A non-material breach will typically not prevent the purpose of the contract from being fulfilled.

An example of a non-material breach would be a situation where a table maker and a table buyer sign a contract for the creation of a custom made table. The contract states that the table maker must finish making the table by 5pm on a Tuesday, but the table was not completed until 5:30 pm. This is a non-material breach because the table was still completed within a reasonable time and neither the table maker nor the table buyer was harmed by this type of breach.

Unlike a non-material breach, a material breach is a major violation of the terms of a contract. A material breach typically harms one person who signed the contract.

An example of a material breach would be a situation where the table maker and table buyer entered into a contract and the table buyer paid a deposit to the table maker but the custom table was never made.

The table buyer would be harmed by this breach because the table buyer relied on the table maker to complete the project. The purpose of the contract in this situation, the creation of a custom table, could not be fulfilled by the material breach.

How Do I Prove a Material Breach of Contract Claim?

In order to prove that a material breach of your contract occurred, you must first show that a contract existed. Typically, contracts are made in writing, but in some cases, a contract may be a verbal or oral promise between two people. Verbal contracts are more difficult to prove, but meetings, phone calls, and text messages may be sufficient to show evidence that a contract existed.

There also must be evidence that the contract was breached. This can be shown through photos, witness statements, and records of bills or payments made to the other party. The evidence should show that you did not receive services or goods that you paid for, or that the service you received was incomplete or inadequate. For example, if you hire a contractor to paint your house, you may be able to show that the contractor breached the contract by showing photos of your half-painted house.

You must also show evidence that you incurred damages as a result of the material breach of the contract. For example, if you paid a contractor to paint your house, but the contractor never showed up to paint your house, your bank statements could be used to document your financial damages.

Fundamental Breach: A fundamental breach of contract is essentially the same as a material breach, in that the non-breaching party is allowed to terminate the contract and seek damages in the event of a breach. The difference is that a fundamental breach is considered to be much more egregious than a material breach; and

Anticipatory Breach: An anticipatory breach occurs when one party lets the other party know, either verbally or in writing, that they will not be able to fulfill the terms of the contract. The other party is then able to immediately claim a breach of contract and pursue a remedy, such as payment. Anticipatory breach may also be referred to as anticipatory repudiation.

What Is an Anticipatory Breach?

An anticipatory breach, also known as anticipatory repudiation, happens when one party realizes the other party will likely not fulfill the terms of the contract. The first party, called the non-breaching party, can then choose to terminate the contract in anticipation of the breaching party’s failure to fully perform under the contract.

Courts have recognized three types of repudiations in contract law:

1) When a party makes a definite and unconditional refusal before a contract obligation is due that they will not perform their promise. This statement of refusal must be clear and unambiguous.

2) The party commits an action that makes it impossible for the other party to perform their obligation owed under the contract.

3) The subject matter in the transaction is no longer available. For example, the house that was to be sold in the contract transaction was transferred or sold to another party that was not part of the original contract. This makes a clear indication that when the contract due date arrives, the party selling the house would not be able to perform his or her promise.

How Does an Anticipatory Breach Happen?

An anticipatory breach usually happens when one party notices that the other party has stopped following the terms of the contract. For example, an employee may stop showing up for work. This can lead to their employer believing that they do not intend to fulfill their part of the employment contract, and the employer can anticipatory repudiate the employment contract.

Can the Non-Breaching Party Sue?

Yes. The non-breaching party can sue the breaching party for damages even though the non-breaching party is technically the one to put an end to the contract. The specific damages that the non-breaching party will receive depend on the circumstances surrounding the breach. Typically, damages include money. A judge can award the non-breaching party to complete the specific performance or an injunction.

It is also possible for the party who repudiated the contract to retract their repudiation and perform. However, this must occur before the contract performance date has occurred and if the other party has not made a material change in reliance of the repudiation.

What Are Contract Damages?

Contract damages awards are legal remedies that are issued in some contract lawsuits. In some contract cases, a non-breaching party may have experienced serious financial or economic loss due to the breach of the other party.

For instance, the parties may have contracted to for the sale and delivery of clothes. If the clothes were sold but never delivered, this could result in losses for the buying party. Damages may be awarded to help the non-breaching party recover their losses. Contract damages are often contrasted with other remedies, such as equitable remedies, which are based more on actions of the parties rather than monetary compensation.

What Are Some Common Damages in a Contract Case?

Damages can be categorized into different categories based on their purpose and function. Some common damages in a contract case include:

  • Compensatory Damages: These are damages that are designed to cover the losses directly caused by a breach.
  • Expectation Damages: These are a specific type of compensatory damages, which cover the amounts that a party originally stood to gain from the written contract.
  • Consequential Damages: These are another type of compensatory damages and cover losses that flow directly from the breach itself.
  • Nominal Damages: This is a type of damages award issued for losses that are difficult to calculate or for injuries where the plaintiff doesn‚Äôt actually incur financial loss.

Various other types of damages can be issued in contracts cases. For instance, punitive damages can be issued in cases where the defendant acted intentionally or where fraud was involved. Punitive damages are somewhat rare; instead, the damages award usually focuses more on the compensation aspects.

What Is Needed to Prove Damages?

This largely depends on the types of damages being awarded. For compensatory damages, the damages need to be calculated with a reasonable degree of certainty. Also, in some cases, the damages are calculated according to market values at the time of the breach. For other types of damages such as punitive damages, proof of tort liability may also be required.

Do I Have to Wait before I Can Sue for Breach of Contract?

Yes. Courts generally want the non-breaching party to wait a reasonable amount of time before suing. This gives the other party time to fulfill its side of the bargain. A reasonable amount of time varies from jurisdiction to jurisdiction. Also, an anticipatory breach may be withdrawn in certain circumstances if the non-breaching party changes their mind.

What is the Difference Between an Oral Contract vs. a Written Contract?

An oral contract is a contract in which the terms are agreed upon verbally, whereas a written contract is a written document. Generally, oral contracts are enforceable and legally binding; however, not every type of contract can be enforceable when they are oral as opposed to written.

Some specific types of contracts must be in writing in order to be enforceable. These may include:

    • Contracts involving the sale or transfer of land;
    • Promises to pay someone‚Äôs debt obligations for them;
    • Contracts that cannot be completed within one year of the creation of the contract;
    • Contracts involving the sale of of goods for more than five hundred dollars; or
  • Contracts that will extend beyond the lifetime of one of the involved parties, therefore leaving the terms and conditions of the contract in the sole knowledge of the living party.

Thus, if you are selling your car for more than five hundred dollars, a simple verbal agreement will not be enforceable, instead you will need to draw up a written contract.

StateWritten ContractOral Contract
Alabama66
Alaska33
Arizona63
Arkansas53
California42
Colorado66
Connecticut63
Delaware33
District of Columbia33
Florida54
Georgia64
Hawaii66
Idaho54
Illinois105
Indiana106
Iowa105
Kansas53
Kentucky155
Louisiana1010
Maine66
Maryland33
Massachusetts66
Michigan66
Minnesota66
Mississippi63
Missouri55
Montana85
Nebraska54
Nevada64
New Hampshire33
New Jersey66
New Mexico64
New York66
North Carolina33
North Dakota66
Ohio156
Oklahoma53
Oregon66
Pennsylvania44
Rhode Island1010
South Carolina33
South Dakota66
Tennessee66
Texas44
Utah64
Vermont66
Virginia53
Washington63
West Virginia105
Wisconsin66
Wyoming108

 

What can be Done about a Breach of Contract?

The types of legal remedies available for breach of contract depends largely on the severity of the breach. Generally, damages awarded are categorized into four groups:

    • Compensatory Damages:¬†Compensatory damages¬†are those that compensate the non-breaching party for their losses. This is the most common legal remedy, and a court can order the breaching party to pay the non-breaching party enough money to get what they were promised by the terms of the contract;
    • Restitution:¬†If the non-breaching party is able to prove that their loss is due directly to the actions of the breaching party, a judge may order¬†restitution, which could include lost wages, medical bills, and property repair and/or replacement;
    • Punitive Damages:¬†Punitive damages are generally awarded alongside compensatory damages. The purpose of¬†punitive damages¬†is to punish the breaching party when they have engaged in particularly egregious behavior in order to breach the contract, such as being intentionally negligent; or
  • Specific Performance:¬†Specific performance is utilized as a¬†legal remedy¬†for breach of contract, and it requires the breaching party to perform their part of the contract. Specific performance is not always available.

If there has been a breach of contract, you should first thoroughly review the contract to see if any instructions regarding a breach were built into the contract. Mandatory arbitration or a liquidated damages clause are two examples of such instructions.

Second, you should let the other party know that there has been a breach. If you committed the breach, it is better to own up to it before it is found out, which could lead to more serious consequences. If the other party committed the breach, it is best to give them an opportunity to rectify the situation before taking legal action.

It is highly important that you maintain any documentation related to the contract. Carefully record every incident that occurs as a result of the contract. Doing so will make it easier to argue your side should the breach result in legal action.

What Is an Oral Contract?

Oral contracts are spoken agreements that are sometimes legally binding. The problem proving an oral contract is the lack of tangible evidence. Oral contract cases often rely on the performance of one or both parties that exhibits a clear reliance on the agreement.

Can You Sue for Breach of an Oral Contract?

Certain oral contracts are considered enforceable. Enforceable contracts are those which a legal remedy is offered if they are breached by either party.

When Are Oral Contracts Unenforceable?

Oral contracts are unenforceable if they fall under the Statute of Frauds which requires a written agreement for instances such as:
  • Marriage
  • Sale of goods above a certain value (varies by state)
  • Transfer of land ownership
  • Contracts that cannot be fulfilled within a year
  • Assuming the position of¬†executor of a will
  • Becoming a¬†surety¬†for another party‚Äôs debt

Why Should I Form an Oral Contract?

Oral Contracts are at their best when they pertain to simple agreements, easily memorized, with plenty of evidence that such an agreement is in place. For example: Joe agrees to buy Jane a refrigerator if Jane gives Joe her television. Joe and Jane handshake on the agreement with their friends Bob and Xander as witnesses, then Joe keeps a receipt from the story he purchased the refrigerator from.

Why Should I NOT Form an Oral Contract?

Although oral contracts have their uses, there are situations where a written contract would be more advisable. These situations include, but are not limited to:

  • The other party asks for an oral contract only- If one party is persistent about not having a contract written down, this is a sign that good faith may not be on that party‚Äôs agenda.
  • The agreement is too complex to be written down- Written contracts are designed for complex deals. Oral contracts, in contrast, should be the simple ones.
  • Neither party has the time- Time should not be factors in such agreements.
  • Both parties trust one another- Contracts (and the law for that matter) are not about trust, but about clarity. Trust is created and maintained when all parties understand what is expected of them and follow through. Mistrust occurs when there is conflict over those expectations.

How Do I Form an Oral Contract?

Although it’s not the preferred method of operating, oral contracts can be considered valid if an agreement is made to buy, sell, or carry out some kind of service as a result of your statement and prior agreement. 

If you wish to form an oral contract, be sure that you can prove that such a contract was made. Having several witnesses, for example, can help establish that your contract exists. Likewise, physical evidence, such as e-mails, letters, receipts or even a thank you card, can count as evidence for your oral contract.

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