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07th February 2012

Beware bespoke limitation periods

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A claim by an employer for negligent workmanship was recently barred due to the effect of a bespoke limitation clause in a contract.

The clause provided that the employer could not bring a claim under the contract after one year from practical completion or, when practical completion did not occur, from when the contractor last performed services. The parties disputed whether practical completion had occurred and what had been the last time the contractor performed services. However the Court of Appeal agreed with the Technology and Construction Court that, although practical completion had not occurred, the contractor last performed services more than one year before the employer had brought the claim. Consequently the claim was defeated by the express limitation clause.

The statutory limitation period for claims for breach of a contract executed as a deed is twelve years, or six years where it is a simple contract. When a contract expressly deals with the limitation period, it often provides for similar periods. This case though is a useful reminder, albeit by quite an extreme example, that parties can agree that a different period should apply. This is particularly important in situations where a supplier’s standard terms of business are incorporated into the contract. They should be checked carefully to avoid inadvertent acceptance of such exceptionally short limitation periods.

For more information, please contact Tim Richards on 01908 247011 or email