In California, the statute of limitations for breach of contract often depends on whether the claim is founded on a written contract or a verbal contract. California law generally provides for a four-year statute of limitations for a breach of contract action on a written contract, and generally provides a two-year period for a contract claim not founded on a writing (i.e., a verbal contract). Those rules sound simple, but determining the actual filing deadline can be much more complicated.
Written Contracts: Generally Four Years
Unless the law provides otherwise, California Code of Civil Procedure section 337 generally requires an action upon a contract, obligation, or liability founded upon an instrument in writing to be brought within four years. Whether a particular claim is truly “founded upon” a written instrument can become disputed when the parties’ relationship includes oral modifications, separate promises, or multiple documents.
Oral Contracts: Generally Two Years
Unless the law provides otherwise Code of Civil Procedure section 339 generally provides a two-year limitations period for an action upon a contract, obligation, or liability not founded upon an instrument of writing. An oral agreement can be enforceable in many circumstances, but both proving its terms and determining the correct limitations period can present additional issues and complications.
Does a contract need not be signed to be considered “in writing” for statute of limitations purposes?
The law seems to be settled that a contract does not need to be signed in order to be considered “in writing” for statute of limitations purposes. In a recent 2006 case, the California Court of Appeal explained that “according to the Supreme Court, [a] contract may be ‘in writing’ for purposes of the statute of limitations even though it was accepted orally or by an act other than signing. … The four-year statute of limitations… does not require that the writing be signed by the party to be charged.”
When Does the Clock Start?
The filing period generally turns on accrual, which is when the cause of action became complete and the plaintiff had a right to sue. In many contract cases, that is associated with the breach. But the analysis can depend on the nature of the obligation, whether performance was due in installments, whether breaches were continuing or separate, and other circumstances.
For that reason, businesses should not assume the deadline runs from the date they finally gave up on negotiations. Settlement discussions and repeated promises to pay do not automatically stop the limitations clock. It is critical to consult with a lawyer to determine when the statute of limitations clock actually started.
Installment and Recurring Obligations Can Be Different
Contracts sometimes require recurring monthly payments or separate installments. Depending on the claim, each missed payment may raise its own accrual issues. A party should not assume that the most recent missed payment revives every older breach.
Can the Deadline Be Extended or Tolled?
Potential tolling or delayed-accrual doctrines can apply in some circumstances, and parties sometimes enter written tolling agreements. Certain acknowledgments or promises can also affect limitations issues under specific statutory rules. These are fact-sensitive questions and should not be treated as a substitute for filing on time.
Arbitration Clauses Do Not Eliminate Deadline Problems
If a contract requires arbitration, the dispute may need to be initiated in arbitration rather than court. Limitations issues can still apply. A business should review the dispute-resolution provision and the applicable arbitration rules early enough to avoid a fight over timeliness.
Why Waiting Is Dangerous Even Before the Deadline
Evidence deteriorates. Employees leave. Emails are deleted under ordinary retention schedules. Memories fade. Counterparties transfer assets. A lawsuit filed within the technical limitations period can still be much harder to prove if the business waited years to investigate and preserve evidence.
What to Do If a Deadline May Be Approaching
Immediately gather the operative agreement and amendments, identify the first and subsequent breaches, preserve all payment and performance records, locate written acknowledgments of the obligation, and speak with counsel promptly. Do not rely on an informal online deadline calculation for a significant claim.
Discuss Your Case with Melmed Law Group
If your company has a substantial California contract claim—especially one involving an older breach or approaching deadline—contact Melmed Law Group promptly to discuss the claim and whether contingency-fee representation may be available. To discuss a matter, call (310) 742-0882 for a free case evaluation.