A statutory limitation is a maximum period you have to commence court proceedings for a cause of action. If you are considering commencing proceedings for a cause of action arising from a breach of contract, you must ensure that you do so within the prescribed limitation period. Otherwise, you may be barred from commencing proceedings. This article explains what limitation periods are, and how they may apply to your contracts.
What is a Limitation Period?
A limitation period is the maximum period which can pass from the time a cause of action arises until you can no longer commence court proceedings. A cause of action might arise where there is a breach of a material term of a contract. For example, you do not receive payment for services you have delivered. It can sometimes be difficult to determine exactly when a cause of action arises, and in these cases, it is best to seek legal advice.
Generally speaking, if you try to commence an action after the expiration of the relevant limitation period, the court will not hear your case. This excludes certain, specific instances. This will be the case even if your claim has merit and you would likely succeed in court.
Purpose of a Limitation Period
Limitation periods are designed to protect the defendant and push parties to resolve claims sooner, rather than later. The rationale is that the longer it takes to bring an action, the less efficient the administration of justice becomes. For example, if the event occurred too long ago:
- key witnesses may be unavailable;
- witnesses may forget events; and
- documents might be lost or destroyed.
Limitation Periods for Contracts
Limitation periods vary across the Commonwealth, and states and territories. They will also vary depending on the legal area subject to the proceedings. If you want to commence proceedings for a cause of action that happened in the past, you should check the relevant jurisdiction governing your contract to ensure that you are within the prescribed limitation period.
Agreement vs Deed
Generally, the limitation period for enforcing a claim arising from a deed will be longer than the period for enforcing a claim arising from an agreement. In most states, a cause of action for an agreement must be brought within six years. In the Northern Territory, the period is three years.
For example, if you enter a supply agreement for furniture, and the supplier breaches their obligation to supply the furniture to you, the six-year limitation period will begin on the first day the furniture is not supplied.
Certain areas of the law are subject to specific limitation periods. For example:
- an action for a breach of a director’s duties must commence within six years of the breach; and
- an action for defamation must commence within three years of the breach.
Sometimes you might have a claim in several jurisdictions or legal areas. It is best to seek legal advice to determine exactly what the limitation period is for your claim.
Limitation Period Expiry
The court can use its discretion to allow you to commence proceedings even if the relevant limitation period has passed. However, in a situation like this, it will be your responsibility to argue that the court should extend the limitation period. In coming to a decision, the court will consider a variety of factors. This includes the length and reason for your delay, and how an extension of the limitation period would likely impact the defendant.
For this reason, it is best to be aware of the relevant limitation period that might apply to you when entering a contract.
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Key Takeaways
Statutory limitations can vary depending on the type of contract, area of law, or jurisdiction subject to the claim. If you want to commence proceedings for a breach of contract, you must ensure that you do so within the limitation period. Otherwise, the court may refuse to hear your claim.
If you need help with a statutory limitation in your contract, our experienced contract lawyers 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 1300 544 755 or visit our membership page.
Frequently Asked Questions
A limitation period refers to the time you have to commence legal proceedings from when a cause of action arises.
On rare occasions, the court may exercise its discretion to extend a limitation period. Here, the party seeking the extension must provide a compelling reason to the court for their request.
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