Limitation periods

limitationLimitation periods are relevant to all sorts of issues you come across each day:

• Is your builder responsible if you discover defects after they finish?

• You are negotiating a new supply contract for your business and considering a request for a 1 year limitation period?

• How long do you keep business records for in case of claims?

For any new contracts that are currently being negotiated and for any acts or omissions that occurred after 31 December 2010, the Limitation Act 2010 applies. That gives you six-years to bring a claim, starting from the date of the act or omission on which the claim is based. In addition claims can be brought within 3 years of when a claimant knew or ought reasonably to have known that a claim had arisen. That is the case even if the six-year period has expired, provided a claimant can show that they did not know nor ought reasonably to have known of the issue. However, all claims are time barred once 15 years has passed from the date of the act or omission on which the claim is based.

For acts or omissions that occurred prior to 31 December 2010 the Limitation Act 1950 still applies. For claims in tort or contract the limitation period is 6 years. That 6 years usually starts from different dates – in the case of contract claims from the date of the breach of the contract and for claims in tort, from when the claim is reasonably discoverable. Claims under deeds must be brought within 12 years of the date of that deed.

There are also specific limitations periods that arise. For example claims under the Fair Trading Act need to be brought within 3 years of the date the loss or damage was, or should have been discovered. Where building work is concerned, the Building Act 2004 imposes a 10 year longstop on claims for defective building work. That 10 year time period is measured from the date of the act or omission giving rise to the claim, which might be the issue of the code compliance certificate or some earlier date like practical completion.

It is also possible to agree in a contract that a shorter limitation period applies. How long that is would be a matter of negotiation. The trick will be to decide if that applies to all claims, whether those that arise under the contract or otherwise at law. Warranties and guarantees might include specific limitation periods separate to those in the main contracts too.

What limitation period applies is fact specific. Where legal claims are being made, the specifics of the claim and what the relevant contracts provide need to be assessed to establish whether you are outside the limitation periods. So the builder in the first example might not be responsible if 10 years had already passed from completion of the work.

If you are in business you should know the general rules that apply and should have a view as to what is appropriate in contracts you are negotiating. Given the above framework one might want to shorten the 15 year longstop liability period.

You should probably be currently keeping new records for at least 15 years, given that is the longstop limitation period for most business types.

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