A recent change in Ohio law shortened the statute of limitations on claims for breach of a written contract from 15 years to 8 years. Effective September 28, 2012, R.C. 2305.06 was amended to provide that “... an action upon a specialty or an agreement, contract, or promise in writing shall be brought within eight years after the cause of action accrued.” This reduction in the statute of limitations brings R.C. 2305.06 in line with Ohio statutes of limitation that apply to other types of contractual claims. This amendment provides an opportunity to review the careful analysis required to determine when a particular breach of contract claim will “expire” pursuant to the applicable statute of limitation.
Specifically, calculating precisely when a breach of contract claim will expire requires three determinations: (1) the type of contractual obligation in question, (2) the facts and circumstances that trigger the applicable statute of limitation to begin run; and, if applicable, (3) the impact of the amendment to R.C. 2305.06 on causes of action that accrued prior to the effective date.
First, depending on the type of contract, one of several Ohio statutes may apply. For example, R.C. 1303.16 provides a six year statute of limitations on claims for failure to pay on a promissory note. R.C. 2305.17 provides a six year statute of limitations for claims arising from breach of an oral contract. R.C. 1302.98 requires claims for breach of a contract for the sale of goods to be brought within four years. The potential claimant must determine the type of contractual obligation in order to determine the applicable period of limitation.
Second, a potential claimant must determine the facts or circumstances that trigger the beginning of the period of limitation. The applicable statute of limitation will begin to run when the cause of action “accrues.” The nature of the particular breach of contract will determine what facts or circumstances give rise to the cause of action; this can become a complicated of law and fact. It is important to note that the limitation period does not begin to run on the date of the contract.
Third, if the claim is governed by R.C. 2305.06, it is necessary to consider the impact of the amendment to R.C. 2305.06 on claims that accrued before September 28, 2012. The text of S.B. 224 helps to clarify the intent of the Ohio General Assembly. S.B. 224 provides the period of limitation for causes of action that accrued prior to the effective date of the amendment is “eight years from [September 28, 2012] or the expiration of the period of limitations in effect prior to the effective date of this act, whichever occurs first.” As a practical matter, this will only impact claims that accrued after September 28, 2005, but prior to September 28, 2012. Consequently, a precise calculation of the period of limitation for a cause of action that accrued prior to the effective date must take into account the retroactive impact of the amendment.
Should you have a question regarding the applicable statute of limitations for breach of a contract claim, or on any other issue of business or corporate documents, please feel free to contact one of our Corporate and General Business Group Members.