Summary
- Under the Limitation Act 1980, the standard limitation period for claims involving simple contracts and most torts (including negligence) is six years from when the cause of action arises, whilst claims involving deeds carry a twelve-year limitation period, with the clock generally starting on the date of breach rather than the date of loss.
- Special rules apply to claims involving fraud, concealment, or mistake, where the limitation period starts when the claimant discovers (or could reasonably have discovered) the wrongdoing, preventing dishonest parties from benefiting from concealed wrongdoing whilst also preventing claimants from delaying action once aware of a potential claim.
- Once issued, a claim form must be served within four months (or six months if served abroad), and courts will only extend this deadline in genuine cases of difficulty serving the claim, treating extensions particularly seriously where they would remove a business’s limitation defence.
- This article is a guide to limitation periods for businesses in England and Wales, explaining the key time limits under the Limitation Act 1980, when they begin to run, and why they matter for managing legal risk.
- LegalVision is a commercial law firm that specialises in advising clients on commercial litigation and dispute resolution matters.
Tips for Businesses
Maintain clear and dated records of contracts, correspondence, delivery dates, and performance milestones to help determine precisely when a limitation period begins to run for any potential claim. Review potential claims promptly upon becoming aware of a breach or loss, as waiting risks the claim becoming time-barred even where the loss only becomes apparent later. If your business uses deeds rather than simple contracts for significant transactions, be aware that the twelve-year limitation period applies, which affects both your exposure to claims and your ability to bring them.
Understanding when a legal claim against your business becomes time-barred is essential for managing risk and knowing when you may have a complete defence. The Limitation Act 1980 sets out specific time limits for different types of claims in England and Wales, and understanding when those clocks start ticking can make a significant difference to your legal position. This article explains the key limitation periods for business-related claims, when they begin to run, and why they matter to your business.
The Time Limits
The Limitation Act 1980 sets out the time limits for bringing claims in England and Wales. The most common limitation periods are:
- Six years for claims involving simple contracts and most torts, including negligence; and
- Twelve years for claims involving a specialty, such as a breach of a deed.
The limitation period usually starts when the cause of action arises. However, some exceptions apply. For example, the limitation period may start later if the claimant only discovers the wrongdoing or loss at a later date.
Contractual Claims
In contract law, a claimant does not need to prove a substantial loss before bringing a claim. The limitation period starts when the breach occurs, not when the claimant suffers loss.
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Claims for Work and Services
When a business provides work or services, the cause of action usually arises when it completes the work. This is the default position unless the contract states otherwise. Clear contract terms can help define when payment falls due. They also help determine when the limitation period starts for any claim.
Guarantees and Indemnities
For guarantees and indemnities, time starts when you know the facts needed to bring a claim. A payment demand does not always start the clock. The guarantee must clearly require a demand before liability starts. Otherwise, a claimant may lose the right to enforce it by waiting too long.
Claims Involving Fraud, Concealment, or Mistake
Special rules apply to claims involving fraud, concealment or mistake. In these cases, the limitation period starts when the claimant discovers the wrongdoing. It can also start when the claimant could reasonably have discovered it through due diligence.
The claimant must prove they could not have discovered the fraud, concealment or mistake earlier. They do not need to show they took exceptional measures that could not reasonably be expected. These rules prevent dishonest parties from benefiting from concealed wrongdoing. They also prevent claimants from delaying action once they become aware of a potential claim.
Extension of Time for Serving a Claim Form
Even if a claimant issues proceedings in time, they must still serve the claim form on time. A claim form remains valid for four months after issue. This period extends to six months if the claimant serves it abroad. If they miss the deadline, the claim will usually expire.
The court can extend the deadline if the claimant applies before the claim form expires. However, the claimant must show a good reason. This usually means a genuine difficulty serving the claim, not oversight or delay.
Why Limitation Matters to Your Business
For businesses, limitation periods create certainty by requiring claimants to bring claims promptly. Once a limitation period expires, the claim is usually out of time. However, special exceptions may apply, such as fraud.
As explained above, the clock can start on different dates. This depends on the claim type and contract terms. Keep clear records of contracts, correspondence and performance dates. These records help determine when a claim may have arisen.
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Key Takeaways
Under the Limitation Act, most business claims have a six-year limitation period. This applies to simple contracts and most torts. Claims involving deeds usually have a twelve-year limitation period. Once the limitation period expires, your business will often have a complete defence.
Understanding when the limitation period starts, and when it may be extended, is important. It can help you manage claims against your business and claims your business may wish to bring.
LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced disputes lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Does the limitation period apply to claims brought against my business by employees or consumers?
Yes, but different types of claims, such as employment tribunal cases or consumer disputes, may have their own specific time limits set by separate laws.
Can my business agree in a contract to shorten or extend the statutory limitation period?
Generally, parties can agree to vary limitation periods in a contract, but such clauses must be clearly drafted and reasonable to be enforceable.
When does the limitation period start for a breach of contract claim?
The clock starts when the breach occurs, not when the claimant suffers loss. For example, a late delivery claim starts on the contractually required delivery date, regardless of when financial loss arises.
What limitation period applies to claims involving deeds compared to simple contracts?
Simple contracts and most torts carry a six-year limitation period. Claims involving a specialty such as a deed carry a twelve-year limitation period under the Limitation Act 1980.
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