Limitation Period for Breach of Settlement Agreement Claims

A settlement agreement is a binding contract used to resolve disputes and avoid or conclude litigation. When one party fails to comply with its terms, the other party may bring a claim for breach of contract. These disputes are governed by limitation rules that determine how long a claim can be issued in court.

In England and Wales, limitation periods are primarily set by the Limitation Act 1980, which applies to most contractual disputes, including settlement agreements. The key issue is identifying when the limitation period begins and whether the agreement is treated as a simple contract or a deed.

Legal Status of Settlement Agreements

A settlement agreement is generally a contract. It may take different legal forms:

• Simple contract: Most settlement agreements fall into this category
• Deed: Some are executed as deeds, particularly where required by statute or where formal execution is used

The classification determines the limitation period for breach claims.

Under the Limitation Act 1980, contractual claims are subject to different time limits depending on form.

Standard Limitation Period for Breach of Settlement Agreement

Six-year rule (simple contract)

For most settlement agreements:

• Limitation period: 6 years
• Legal basis: breach of contract under Section 5 Limitation Act 1980
• Applies to:
  • Non-payment of settlement sums
  • Breach of confidentiality clauses
  • Breach of mutual obligations or undertakings

The six-year period begins from the date the breach occurs, not when the breach is discovered.

Example

• Settlement agreement signed: 1 March 2022
• Payment due: 1 April 2022
• Payment not made
• Limitation period expires: 1 April 2028

Settlement Agreements Executed as Deeds

Where a settlement agreement is a deed:

• Limitation period: 12 years
• Applies to:
  • Formally executed deeds
  • Certain structured or high-value commercial settlements

This longer period reflects the formal legal nature of deeds.

When Time Starts to Run

The limitation period begins when the cause of action accrues, meaning when the breach first occurs.

For settlement agreements, this depends on the obligation breached:

• Non-payment: from the date payment was due and not made
• Confidentiality breach: from the date the disclosure occurred
• Ongoing obligations: each separate breach may start its own limitation period
• Repudiatory breach: from the date of refusal to perform

The clock does not normally start from when the injured party becomes aware of the breach.

Continuous and Repeated Breaches

Some settlement terms create ongoing obligations, such as confidentiality or non-disparagement clauses.

In these cases:

• Each individual breach may give rise to a separate claim
• Earlier breaches may become time-barred while later breaches remain actionable
• Courts assess limitation separately for each actionable event

Acknowledgment and Part Payment

The limitation period can be reset in certain circumstances:

• Written acknowledgment of liability
• Part payment of the settlement sum

This is governed by the Limitation Act 1980 rules on acknowledgment.

Effect:

• A fresh six-year limitation period begins from the date of acknowledgment or payment

Effect of Breach of Settlement Agreements in Litigation Context

Settlement agreements are often used to:

• End employment tribunal claims
• Resolve commercial disputes
• Avoid court proceedings through compromise

If breached, the claimant typically brings a fresh breach of contract claim in the civil courts rather than reopening the original dispute.

Where the agreement is a COT3 settlement (ACAS conciliation) in employment disputes, enforcement still proceeds through contractual principles, subject to the same limitation structure, though procedural routes may differ.

Common Legal Issues in Limitation Disputes

1. Delay in bringing claims

A claim issued after six years (or twelve for deeds) is generally statute-barred, meaning it cannot be enforced in court.

2. Misidentifying the breach date

Disputes often arise over when the breach occurred, particularly in:

• Staged payments
• Continuing confidentiality obligations
• Complex settlement structures

3. Multiple breaches

A single settlement agreement may generate multiple limitation periods depending on repeated conduct.

4. Hidden breaches

In most cases, ignorance of the breach does not stop time running, although fraud or deliberate concealment may affect limitation under Section 32 of the Limitation Act 1980.

Defences Based on Limitation

If a claim is brought outside the limitation period:

• The defendant can raise limitation as a complete defence
• Courts will generally strike out or dismiss the claim if proven time-barred
• The burden is typically on the claimant to show the claim is in time or that an exception applies

Practical Implications

For claimants

• Early identification of breach dates is essential
• Delay may permanently prevent enforcement
• Settlement drafting should clearly define payment and obligation timelines

For defendants

• Historic settlement disputes may be unenforceable if limitation has expired
• Review dates of alleged breach carefully
• Part payments or written admissions may restart limitation periods

For legal drafting

• Settlement agreements should clearly specify:
  • Payment schedules
  • Trigger dates for obligations
  • Confidentiality duration and scope

Clear drafting reduces later disputes over limitation calculation.

Key Takeaways

The limitation period for breach of settlement agreement claims in England and Wales is usually six years for simple contracts, running from the date of breach. If the agreement is executed as a deed, the period is twelve years. Each breach may create its own limitation period, particularly in cases involving ongoing obligations such as confidentiality or staged payments. Once the limitation period expires, the claim is generally unenforceable in court unless a legal exception applies.