When Does Cause of Action Accrue in Contract: A Guide for Business Owners
As a business owner, you may enter into contracts on a regular basis. However, disputes can arise when one party breaches the terms of the contract, resulting in a potential lawsuit. In order to file a lawsuit, the plaintiff must establish that the cause of action has accrued. This means that the plaintiff must prove that they have suffered an injury that is legally recognized and is entitled to relief. But when does cause of action accrue in contract? In this guide, we will explore the answer to this question and help you understand the importance of timely filing.
Understanding the Accrual of Cause of Action
Cause of action accrues when a plaintiff becomes aware of the breach of contract or when the breach should have been discovered through reasonable diligence. The date of accrual is important because it determines the deadline for filing a lawsuit, known as the statute of limitations. In contract disputes, the statute of limitations begins to run when the cause of action accrues.
There are certain circumstances when the date of accrual may be delayed, such as when the breach of contract is fraudulently concealed. In these instances, the statute of limitations may not begin to run until the plaintiff discovers the breach or should have discovered it through reasonable diligence. However, it is important to note that the statute of limitations will not be tolled indefinitely, and there will always be a time limit in which to file a lawsuit.
Determining the Date of Accrual
The date of accrual can vary depending on the type of contract and the circumstances surrounding the breach. In general, the date of accrual is the date that the breach occurs. For example, if a vendor fails to deliver goods by the agreed-upon delivery date, the cause of action accrues on that date.
In certain cases, the date of accrual may be delayed or can be difficult to ascertain. For example, if a contract involves ongoing obligations, such as a service contract, the cause of action may not accrue until the services are terminated. Similarly, if a contract involves a warranty, the cause of action may not accrue until the warranty period has expired.
As a business owner, it is important to keep accurate records of all contract obligations and to be aware of any potential breaches. If you believe that a breach of contract has occurred, it is important to consult with an attorney to determine the date of accrual and any applicable statute of limitations.
The Importance of Timely Filing
Failing to file a lawsuit within the applicable statute of limitations can result in the dismissal of the case. This means that the plaintiff will be unable to recover damages even if they can prove that a breach of contract occurred. As a business owner, it is important to be aware of the applicable statute of limitations and to file a lawsuit in a timely manner.
In addition to the risk of dismissal, delaying filing a lawsuit can also result in the loss of evidence or witnesses. As time passes, memories fade, and evidence can be lost or destroyed. By filing a lawsuit promptly, the parties can more effectively gather and preserve evidence.
Understanding when cause of action accrues in contract is essential for any business owner that enters into contracts. Accrual can vary depending on the type of contract and the circumstances surrounding the breach, and it is important to keep accurate records of all contract obligations. Filing a lawsuit in a timely manner is critical to preserve the claim and to ensure that damages are recoverable. If you have any questions or concerns regarding contracts or cause of action accrual, it is recommended that you consult with an experienced attorney.