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Statute of Limitations on Contract/Sales in Pennsylvania
Pennsylvania law is replete with various statutes of limitation, governing the length of time which aggrieved parties have in order to file their claims in the appropriate court. Any claims not filed with the prescribed time period are deemed stale and time-barred. Limitation periods range from six months (for giving the Commonwealth and its political subdivisions written notice of intent to file a personal injury claim), to one year (for defamation and invasion of privacy claims), to two years (for most other personal injury and tort claims), to twenty years (for execution of judgments against personal property), and to twenty-one years (for actions to recover possession of real property).
The two statutes of limitation which are of most interest to businesses are located at 42 Pa.C.S.A. §5525, governing the time for bringing actions on most contracts, and the Pennsylvania Commercial Code at 13 Pa.C.S.A. §2725, governing the time for bringing an action for breach of contract for the sale of goods. Both statutes provide a four-year limitations period. The reason for a four-year limitations period, as noted in the comment to 13 Pa.C.S.A. §2725, is that most merchants follow a practice of keeping business records for four years.
So the rule is simple enough. For most breach of contract cases, there is a four-year statute of limitations. End of discussion? Not quite.
First, the parties’ agreement can itself provide for a different limitations period. That is, the contract can provide for a limitations period of less than four years, and such a contractual limitations period can be legally binding. The Pennsylvania Commercial Code at 13 Pa.C.S.A. §2725 specifies that “by the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.” Thus, before a business can rely upon the assumption that it can wait up to four years before filing an action for breach of contract, the business must first make sure that the contract does not provide for a shorter period.
Even when there is certainty as to the length of the limitation period, there is still the question of when that limitation period starts running. In the context of negligence and certain other tort cases, the “Discovery Rule” provides that the limitations period does not begin to run until the plaintiff knows or should know of the claim, which is not always the date on which the injury occurs. This is particularly true in medical negligence cases, where the onset of symptoms is often delayed. But there generally is no discovery rule in the context of actions for breach of contract. 13 Pa.C.S.A. §2725(b) provides: A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
As suggested by Section 2725(b), warranty claims present a special situation. In most cases, the four-year limitations period begins to run when the warranted goods are delivered to the buyer. The rule is different only when the warranty contains a clear and unambiguous expression of the seller’s intention to extend the warranty to apply to the future performance of the product. Thus, if an auto manufacturer provides a three-year, 36,000 mile new vehicle warranty, such a warranty warrants that the vehicle will perform to a certain standard within three years or 36,000 miles. If the vehicle experiences a covered mechanical failure during the third year after purchase, and before the accrual of 36,000 miles, then the buyer’s four-year limitations period would begin running on the date of the mechanical failure, not on the date when the vehicle was first delivered to the buyer. However, where a warranty provides, for example, for the correction of a manufacturing defect which is reported to the manufacturer within one year after delivery, the language of the warranty does not clearly and unambiguously extend to future performance of the product. Rather, the one year period is merely a period for reporting a defect, rather than a promise of future performance following the date of delivery. In this latter case, then, the four-year statute of limitations would begin running on the date of purchase.
The statute of limitations applicable to breach of warranty claims provides for interesting and potentially complex scenarios when the alleged breach of warranty also gives rise to a claim for personal injuries. In any such case, the claim for personal injuries is subject to a two year statute of limitations, potentially running from the date of discovery of negligence, while the breach of warranty statute of limitations pertaining to the same injury may provide for a four-year limitations period running not from the date of injury or from the date of discovery, but from the date of purchase of the allegedly defective goods. Thus, it is possible for a claim for breach of warranty to be time-barred while a claim for negligence arising out of the same injury is not time-barred, even though the warranty claim is subject to a longer statute of limitations. This becomes an issue for late-filed claims because the damages available under a warranty claim are not the same as damages available under a negligence claim.
Further, while it is clear that a cause of action accrues, and the four-year statute starts running, when the breach occurs, there is often some difficulty in determining precisely when it is that a breach of contract occurs. If there is a definite time for performance of a contract, such as a contract calling for the payment of a sum of money on or before a certain date, the statute of limitations does not begin running until that date arrives. On the other hand, if a contract requires one party to perform any act upon the demand of another, as where one is obligated to pay a sum of money upon demand, the statute of limitations begins to run immediately, from the date of the contract. One question that often arises in the context of sales contracts is whether the statute of limitations is tolled – i.e., does not run – during a period in which the breaching seller attempts to make repairs. The “Repair Doctrine” will toll the statute of limitations only where evidence reveals that repairs were attempted, representations were made that the repairs would in fact cure the defects, and the plaintiff relied upon such representations. In those circumstances, and only in those circumstances, the statute of limitations is tolled as a matter of estoppel. The rationale is that it would be fundamentally unfair to let the statute of limitations run against a plaintiff who refrained from filing suit upon the clear assurances of the seller that the seller would correct the breach.
In a similar vein, fraudulent concealment could also be a basis for tolling the statute of limitations. As a general rule, fraudulent concealment of a cause of action will toll the statute of limitations until the cause of action is discovered by the plaintiff or might have been discovered by the exercise of reasonable diligence. In order for the statute of limitations to be tolled on grounds of fraud, the defendant must have committed an affirmative independent act of concealment that prevented the plaintiff from learning of the cause of action. Mere silence on the part of the defendant is generally not sufficient to toll the statute.
There are many other events which may or may not effect the limitation of actions, depending upon the particular facts of the case, such as infancy, death, the pendency of other proceedings, and war. If you have any questions about how long your business can let a claim go before taking legal action, contact your legal counsel before late becomes too late.
Bruce L. Baldwin, Esquire is a partner in the Pottstown law firm of Wolf, Baldwin and Associates, P.C., and has represented consumers and businesses for over 20 years. He may be reached at [email protected].
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