Statute of Limitations to Collect on Accounts for Sale of Goods

Are you a building supplier with stale accounts? Time may not be on your side!

In North Carolina, the statute of limitations for a breach of contract action is normally three years. A cause of action accrues, i.e. the clock starts to tick, at the time of the breach or, generally, when one party fails to pay. However, if the contract involves the sale of goods, then the contract is governed by the Uniform Commercial Code and N.C. Gen. Stat. § 25-2-725(1) which extend the statute of limitations to four years for the “pure sales aspect of the transaction.” In these actions, the clock starts to tick when the final payment is made by the buyer. It is important to note that if a third party guarantees payment on the account, then this separate guarantee obligation will be governed by the three year statute.

Typically, building supply companies maintain an open account with their buyers. An open account results where the parties intend that the individual transactions are to be considered as a connected series rather than as independent of each other. A balance is kept by adjustments of debits and credits. In this instance, further dealings between the parties are contemplated and the seller may not know that the other party is in breach until a significant amount of time lapses since the last payment on the account. In most cases, if the buyer makes any payment on the account, even a partial payment, the clock will reset for statute of limitations purposes. If the account is several months past due, then when a payment is made the seller should try to have the buyer acknowledge the entire remaining balance on the account.

If a buyer asserts the statute of limitations as a defense, the seller will have the burden of proving the last date in which payment was made and that this date was within the four year time period. Therefore, if you’ve kept a detailed log of payments from buyers then you may still have time to collect that debt!

For more information on this or any other collection related topic, please contact Andy Anderson or Law Clerk, Stephanie Owens, with Anderson Jones, PLLC, Attorneys at Law, at (919) 277-2541 or by email!