Statute of limitations
A statute of limitations is the legal deadline for bringing a claim. Once it passes, the claim is usually barred, and contracts may shorten it.
What it means
A statute of limitations sets how long you have to file a lawsuit after a claim arises. Once the deadline passes, the other side can usually get the case dismissed, however strong it is. For breach of contract, US limitation periods vary by state, commonly somewhere from three to ten years, and are often longer for written contracts than oral ones.
Contracts can change the clock. Many say claims must be brought within one or two years, and courts in many states enforce a shorter period if it is reasonable. Some states restrict shortening, some allow certain contracts to lengthen the period, and sales of goods often follow their own rules, so the answer depends on the governing law.
Here is the trap. A consultant discovers 18 months after a project ends that the client underpaid the final invoice. State law might allow six years, but if the contract says claims must be brought within one year, the claim may already be gone.
When the clock starts matters too. It usually runs from the breach, not from when you find out, although some states and claim types apply a discovery rule, and some contracts start the clock on a specific event.
What to watch for
- Look for a clause that shortens the time to sue, such as “within one year after the cause of action accrues.”
- Check when the clock starts: at the breach, at discovery, at the end of the contract, or on another stated event.
- See whether a shortened period applies to both sides or only to claims against one party.
- Read the survival clause too, since some courts treat a survival period as a deadline for bringing claims.
- Check the governing law clause, because it affects which limitation period applies, and the rules vary by state and country.
Example clause
No action arising out of this Agreement may be brought by either party more than one (1) year after the cause of action has accrued, except actions for non-payment or for breach of Section 7 (Confidentiality).
Most claims must be filed within a year of when they arise, which can be much shorter than state law would otherwise allow.