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What Impact Can a Standstill Agreement Have in a Commercial Dispute?

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You may come across a commercial dispute during your business activities. If so, there are various ways to deal with it. For example, you may use a form of alternative dispute resolution (ADR) such as mediation or arbitration. Alternatively, you may take commercial action with a court claim. If you do consider a potential claim, you may find a standstill agreement helpful. This article will explain the impact of a standstill agreement on the statute of limitation period in a commercial dispute.

What is the Statue of Limitation Period?

A statute of limitation period applies whenever a person or business wishes to apply to a court for any civil legal matter. This applies to civil claims rather than criminal matters, so it occurs when you make a court claim for a commercial dispute. The statute of limitation period is the period when you can make an application for court proceedings. The length varies between types of court and proceedings, and the Limitation Act 1980 details most of these. 

Depending on what your commercial claim is about determines the statute of limitation period. It is likely, however, to be a dispute about a commercial contract. If so, the time limit for the breach of contract is six years. The statute of limitation period for your commercial dispute seats begins when the breach of contract occurs. This is because when the issue arises, it becomes relevant to apply for a court claim by the aggrieved party.

What is a Standstill Agreement?

Although the limitation period for bringing commercial claims may be evident, you may need more time in certain situations. Perhaps the limitation period has not yet expired, but it will soon, yet you require more time to consider the claim. You may want to see if you can resolve the commercial dispute with the other party. If you can, it will be possible to avoid commercial litigation altogether. 

Alternatively, you may know you wish to make a claim but need more time to formulate it before applying to the court. Perhaps you require more time to seek evidence or take legal advice. If either of these examples apply, you may benefit from a standstill agreement. You may agree on this for your commercial claim or any other type of civil claim. Standstill agreements are a common and valuable tool for use in litigation. 

A standstill agreement is where you and the other party to the claim, so the claimant or defendant, agree to extend time or suspend the limitation period. The period changes from the date you enter into the agreement. Therefore, if you wish to use one, the sooner you do, the better.

Accordingly, the limitation period for your claim may be longer than the usual six years. As its name suggests, it means that time stands still for the claim. During this period, neither you nor the other party can complain that each other is not doing anything active regarding the commercial claim. 

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Is a Standstill Agreement Useful?

Standstill agreements are a valuable tool for commercial litigation. Extending the limit of the limitation period can be cost-effective. During this time, you may change your mind and decide not to make a claim. This will save your business the time and financial costs of commercial litigation. 

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A standstill agreement also, on the other hand, preserves your right to claim for commercial proceedings should you wish to pursue this option. A drawback, however, of these agreements is that as soon as you agree on one, the other party knows you are potentially considering court proceedings

Key Takeaways

If you consider commercial litigation, you must know the statute of limitation period. This is the timeframe in which you can apply to the court. If your commercial claim is due to a contractual breach, this is six years. However, you may need clarification on whether you actually wish to make a claim. Or, for example, you may require time to prepare your claim. In that case, you may want to form a standstill agreement. This makes the time in the limitation period stand still or extend from the agreement date. 

If you need help understanding standstill agreements in a commercial dispute in the UK, LegalVision’s experienced disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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Clare Farmer

Clare Farmer

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