When Does the Limitation Period Start in Contract Claims?

In contract law, the limitation period determines the maximum time within which a party can bring a claim through the courts. In England and Wales, most contractual claims are governed by the Limitation Act 1980, which sets a standard time limit of six years for simple contracts.

A central issue in any contract dispute is not just how long the limitation period lasts, but when it starts running. This starting point can determine whether a claim is valid or already time-barred, making it one of the most important concepts in commercial litigation and debt recovery.

Legal Framework: Limitation in Contract Claims

The main statutory provision is:

• Section 5 Limitation Act 1980: six years for actions founded on simple contract

The limitation period begins when the cause of action accrues, meaning the point at which the claimant first has the legal right to bring a claim in court.

In contract law, this is generally when a breach of contract occurs, not when loss is discovered or when the claimant chooses to act.

Core Principle: Time Starts at Breach

General rule

The limitation period starts when:

• A contractual obligation is breached, and
• The claimant is entitled to bring proceedings immediately

This is known as the date of accrual of the cause of action.

Key point

The courts focus on breach, not awareness, loss, or demand for payment.

Common Starting Points in Contract Claims

1. Non-payment of a debt

For unpaid invoices or contractual sums:

• Time starts on the due date of payment
• If payment is not made, breach occurs immediately

Example:

• Invoice due: 1 March 2020
• Not paid: breach occurs on 1 March 2020
• Limitation expires: 1 March 2026

2. Breach of performance obligations

Where a contract requires performance (goods or services):

• Time starts when performance is due but not provided
• Or when defective performance occurs

Example:

• Goods due: 10 June 2021
• Not delivered: breach on that date

3. Repudiatory breach

Where one party indicates they will not perform the contract:

• Time starts when the repudiation is accepted
• Not necessarily when the statement or conduct occurs

4. Breach of continuing obligations

For ongoing duties (e.g. confidentiality, maintenance, instalment payments):

• Each breach may create a separate limitation period
• Time runs separately for each breach event

The Importance of “Accrual of Cause of Action”

The concept of accrual determines when the claimant first has a complete legal right to sue.

A cause of action accrues when:

• All elements of the claim exist
• The claimant could issue proceedings immediately

In contract claims, this is usually straightforward, but disputes arise in more complex arrangements involving:

• Conditional obligations
• Instalment payments
• Long-term service contracts
• Contracts with staged performance

When Time Does NOT Start Running

Several factors do not delay the start of the limitation period:

1. Lack of awareness of breach

• The claimant does not need to know about the breach
• Time runs regardless of discovery (subject to fraud or concealment exceptions)

2. Delay in claiming or invoicing

• Waiting to issue an invoice does not delay limitation
• The breach date remains the key trigger

3. Ongoing financial loss

• Continuing loss does not restart limitation
• Only the breach date matters

Exceptions That May Delay the Start of Time

1. Fraud, concealment, or mistake

Under Section 32 Limitation Act 1980:

• Time may not start until the claimant discovers (or could reasonably discover) the issue
• Applies where facts are deliberately hidden or unknown due to mistake

This is particularly relevant in commercial fraud and accounting disputes.

2. Conditional contractual obligations

Where obligations depend on a condition:

• Time starts when the condition is satisfied or fails
• Not before enforceability arises

3. Instalment contracts

Where payments are made over time:

• Each missed payment creates a separate breach
• Each has its own limitation start date

Starting Point in Specific Contract Scenarios

A. Sale of goods contracts

• Time starts on delivery date if goods are defective or not delivered
• Or on payment due date if unpaid

B. Service contracts

• Time starts when services should have been performed
• Or when defective performance occurs

C. Construction contracts

• Time may start at practical completion or breach of milestone obligations
• Complex contracts may involve multiple accrual points

D. Settlement agreements

• Time starts when payment or obligation under settlement is breached
• Not when original dispute arose

Why the Start Date Matters

The start date is critical because:

• It determines whether a claim is in time
• It affects recoverable damages
• It may partially bar older claims in long-running disputes
• It can lead to early strike-out of proceedings

In commercial litigation, limitation is often a preliminary issue before the merits of the case are considered.

Practical Issues in Determining Start Dates

1. Identifying the exact breach event

Disputes often arise over:

• When payment became due
• Whether obligations were conditional
• Whether conduct amounted to breach

2. Multiple breach dates

Contracts may involve:

• Repeated breaches
• Continuing obligations
• Multiple performance stages

Each may have a separate limitation start date.

3. Documentary evidence

Key evidence includes:

• Contracts and amendments
• Invoices and payment terms
• Correspondence confirming breach
• Project timelines and delivery records

Common Questions from our Readers

Does limitation start when damage occurs?

No. It starts when the breach occurs, even if loss arises later.

Does sending a reminder reset limitation?

No. Only acknowledgment of liability or part payment may affect limitation.

What if the breach is discovered later?

In most cases, discovery does not affect the start date, except in fraud or concealment cases.

Can different parts of a contract have different start dates?

Yes. Each breach event can trigger its own limitation period.

Key Takeaways

In contract claims in England and Wales, the limitation period generally starts when the cause of action accrues, which is usually the date of breach under the Limitation Act 1980. This is typically when payment becomes due and unpaid, services are not performed, or contractual obligations are breached. The claimant's knowledge of the breach is usually irrelevant, except in cases involving fraud, concealment, or mistake. In complex contracts, multiple breaches may create multiple limitation start dates, making accurate legal analysis essential in commercial disputes.