When Does the Cause of Action for Breach of Contract Arise?

Section 5 of the Limitation Act 1980 states that an action founded on a simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued, but when does the cause of action accrue?

In Consulting Concepts International Inc v Consumer Protection Association (Saudi Arabia) [2022] EWHC 461 (Comm) the Court determined the six-year limitation period begins from the date services were executed, unless a “special term” within the contract alters this principle.

In this claim, the Claimant alleged to have contracted with the Defendant to provide services. The alleged contract specified the Claimant would invoice for services and payment would be made by the Defendant within 90 days. It was the Claimant’s own case, that all services were executed, and invoices issued on or before 17 December 2013.  The contract then allowed payment within 90 days; however, no payment was made.

A claim was issued against the Defendant on the 27 December 2019. The Claimant served the Particulars of Claim, late, which resulted in the Defendant’s application to strike out the Claim Form and Particulars of Claim. In turn, the Claimant made an application for retrospective permission to serve the Particulars of Claim which was heard alongside the Defendant’s application.

At the Hearing, the claim was struck out in its entirety as the Court concluded the cause of action arose when services were executed by the Claimant and not the date payment was due. The 90-day period for payment was not considered a “special term” by the Court, it was considered a provision for the manner of payment, which was not sufficient.

The claim had therefore become statute barred on 17 December 2019, because the six-year limitation period ran from 17 December 2013.

So, what does this mean for Creditors? It means Creditors may wish to consider the inclusion of a “special term” when drafting contracts, to afford parties plentiful time to bring a claim, if a dispute were to arise. It also means Creditors will need to be certain of when services were executed, and in the absence of a “special term” in the contract, ensure any claim is brought within six-years of the execution of services.

It is worth noting permission to appeal has since been granted in respect of this case.

Written by : Leonie-Robyn Murtagh (Associate Solicitor)

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