What is a Statute of Limitations and Should I Care?

A statute of limitations (‘SOL”) is an important legal concept embodied in either statutory or judicial case law. In short, an SOL is the period of time that a plaintiff has to file a lawsuit before his or her claim expires. If you do not file a complaint in court before expiration of the SOL that applies to your claim, your complaint will be dismissed and your claim will disappear.
It is common for people and even large companies to delay filing a lawsuit because they want to try and reach a settlement with the other party. Trying to settle a case before jumping into court is usually a good strategy because once you pull the trigger and file a lawsuit, it becomes more difficult to settle the dispute and the cost of filing fees and attorneys’ fees can become prohibitive.

Nevertheless, you should always consult early with an attorney to examine (1) which SOL time period applies to your type of claim or claims and (2) when the SOL began to run (based on the facts of your case) and (3) how much time you have before your claims become legally stale. Don’t make the mistake of thinking you have endless time to file your complaint in court because the technical calculation of a SOL can be tricky and its consequence is fatal to your legal rights. Also, do not confuse sending a demand letter to the other person – that will not satisfy the SOL which can only be satisfied by actually filing a complaint in a court of law.
SOLs vary depending on the type of claim or cause of action you have against the other party. For example, in California, the SOL for a breach of a written contract is 4 years from the date of the breach by the other party. In comparison, the SOL for a breach of an oral or verbal contract is only 2 years from the date of the breach. A claim for breach of a promissory note has a 6 year SOL and a claim for fraud has a 3 year SOL from the date of discovery. The SOL in California for suing your attorney for malpractice is only 1 year from the date of discovery of the negligent act or 4 years from the date of the wrongful act whichever occurs first. The SOL for a medical malpractice claim is 1 year from the date of discovery or 3 years from injury, whichever occurs first. There are many SOLs spelled out in the California statutory codes as in other states.

However, the most important analysis is to determine when the particular SOL in your case began to run, i.e., when did the “clock” start to run. The reason why this is important is that the date on which a contract is breached may not be altogether obvious or easy to determine. In a contract for payment of services, the terms of the contract will usually dictate when payment is required. Once the payor has not met that payment deadline, the 4 year SOL clock begins to run, i.e., you must file a complaint in court for breach of contract within 4 years otherwise your claim will expire. However, if the claim is about the services rendered by an accountant or other service professional, it may not be easy to pinpoint the date on which the professional committed negligence. It is usually the earliest date on which a negligent act was committed or discovered that will trigger the SOL.
But a critical concept must be understood – a SOL can be triggered when the complaining party “discovered” the breach or act that caused damage. This varies on a case-by-case basis but a court will generally examine when you actually discovered the breach or should have discovered” the breach or offense, whichever occurred first. In other words, if a person believes his or her accountant committed negligence when a tax refund was denied in 2016, the SOL for the claim could have actually started earlier than 2016 – for example, if you were suspicious of the competence of your accountant’s tax filing skills because he or she has been historically irresponsible getting your taxes filed, a court may determine that your SOL actually began to run years before the denial of your tax refund in 2016 and if so, then your complaint may be dismissed and your claims may be lost forever.

There are situations where a SOL may be extended due to situations spelled out in a statute such as in California, if the complainant is a minor for part of the SOL time period, a plaintiff is imprisoned or absent during times of war, or the defendant is absent from the State of California. However, the exceptions are very few and very narrow so do not assume that your situation will extend your SOL beyond the time period specified in a statute.

The calculation of the SOL that applies to your case is something that you should examine early with the assistance of an attorney because the consequence of blowing the SOL is critical – if you do not file your complaint before the SOL runs out, you will forever lose your right to sue the other person or recover any damages.
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