Limiting Breach of Contract Actions

Contractual Agreements Can Limit Breach of Contract Statute of Limitations

A recent NC Court of Appeals decision, Steele v. Safeco Insurance Company of America, et al. (COA12-266) affirmed the legal position that when there exists no controlling statute to the contrary, parties to a contract are free to contractually limit the time for bringing an action on the contract to a period less than that provided in the general statute of limitations, as long as the shorted time period is a “reasonable” period.

In the Steele case, Steele suffered a fire at his home that caused damages. Steel contracted with a fire restoration and clean-up contractor, MHH, to repair his home on July 20, 2007. The contact terms between Steele and MHH contained a one-year limitation on actions “relating to the subject matter of the contract…” Through the course of the clean-up, the MHH disposed of some of Steele’s property. Steele claimed that the contractor had not been authorized to take that action. Steele and MHH tried to resolve their issues, but eventually Steele filed suit on July 2, 2010. MHH argued that the breach of contract complaint was filed beyond the agreed-upon limitation date. The normal limitation period for a breach of contract action is 3 years, pursuant to N.C.G.S. § 1-52.

The court agreed with MHH and held that the general statutes do not prohibit shorter limitations periods than the three years provided by the statute. There is a long line of cases in North Carolina upholding contractual limitations in many contexts. There are also court opinions that have held that a one year limitation period is “reasonable.”

If you have any questions about this topic or any other legal issue, please contact Attorney Todd A. Jones with Anderson Jones, PLLC today at (919) 277-2541 or by email!