Unpaid Invoices, Breached Contracts and the Statute of Limitations

A statute of limitations is a law which places a time limit on pursuing a legal remedy in relation to wrongful conduct.  A statute of limitations is said to start running at the time a claim accrues. Ordinarily, that is the time at which an injury is suffered.  After the expiration of the statutory period, unless a legal exception applies, the injured person loses the right to file a lawsuit seeking money damages or other relief.

With business collections, the typical statute of limitations at issue is the statute applicable to breach of contract actions.  However, it is imperative that you seek legal counsel to determine what other legal remedies may be available to you beyond a breach of contract action.  Your attorney will be able to counsel you on other legal remedies and their applicable statutes of limitations. In California, the statute of limitations for breach of oral contracts is two years and for breach of written contracts is four years.  As mentioned above, the claim accrues "at the time at which an injury is suffered."  For breach of contract actions, the "injury" is typically interpreted as the date of the breach.  In other words, the date the breach occurs is the date the clock begins ticking as it relates to the applicable statute of limitations.

Hopefully, as a business owner your delinquent accounts and breached contracts do not approach the expiration of the statute of limitations.  To ensure a proactive approach to handling business debt, please refer to Griswold Law's recent articles on tips for protecting and maximizing revenue and collecting business debt.

As explained above, the statute of limitations effectively prevents a plaintiff from bringing a claim beyond the expiration date of the statute.  However, there may be instances where a statute of limitations period is tolled or delayed.  There must exist specific circumstances.  You should consult with an attorney to receive a comprehensive legal explanation regarding the legal concept of "tolling." In addition, be aware that California courts have upheld provisions of contracts that limit or reduce the statute of limitations time period as it relates to the content of the contract and the roles, obligations, rights and duties of the parties to the contract.

For more information about breach of contract claims, applicable statutes of limitations and business collections issues, please contact us today.

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