Contracts: Right of action that has lapsed: don’t forget to stay your claim!

If you wait to collect an outstanding debt, you will take the risk that the period of limitation has expired and the debt can no longer be collected. A claim to repair defects or an entitlement to compensation can also become prescribed. However, you can prevent this by staying the claim.

What is prescription?

Each claim has a statutory period of limitation. This means, after a certain period of time, the claim can no longer be enforced. The reason for this is legal certainty. It is not intended that a person will be faced with old claims and receivables with all the corresponding problems of proof after many decades.

Limitation periods

Limitation periods depend on the kind of claim in question. In the event of a regular agreement (for instance, a loan or a sales contract) a claim will expire after five years. This does not have to be included in the contract. A claim for compensation or for delivery of a product that has not yet been received, will lapse after five years.

Actions for a contract/agreement to be declared void (for instance an agreement that is to be declared void for incompetence, fraud or error) will lapse after three years.

If you have tried to recover a debt through the courts and there is an enforceable document, the entitlement to enforcement will expire in principle only after 20 years.

When does a limitation period commence?

Usually, prescription commences on the day following the day on which immediate performance can be claimed. For instance, if an invoice must be paid on 1 March 2015, the limitation period will commence on 2 March 2015.

Exceptions are claims for compensation and for termination or repair after a shortcoming in the fulfilment of an agreement. In this case, the period of limitation will commence when the claimant is both (i) aware that there is damage and (ii) aware who is responsible for the damage. Due to these subjective factors, Dutch law contains a maximum period of limitation of twenty years, which commences the day after the day the event that caused the damage occurred. After the period of twenty years, the claim can no longer be recovered, even if the damage is still not known or it is unclear who caused it. There are only a few exceptions to this rule, and of these the asbestos cancer compensation claims are the best known ones.

Interrupting the limitation period

It is possible to interrupt the limitation period. After the limitation period of the claim has been interrupted, a new period of limitation of the same length of time will commence.

There are three ways in which the limitation period of a claim can be interrupted:

1. The creditor can send a written reminder or notification in which he explicitly reserves the right to performance. A condition is that the debtor must have received the reminder or notification. Make sure you will receive a confirmation of receipt.
2. The creditor can interrupt the limitation period by commencing legal proceedings.
3. The debtor himself can provide, whether consciously or not, that the prescription will be interrupted by recognizing a claim. By recognizing the claim, the limitation period is interrupted and at the same time a new limitation period of the same length of time will commence.

Action

• If you have an open claim you have to follow the following steps to prevent the debt from expiring:
  • Check what kind of claim it is. If in doubt, consult a lawyer.
  • Check what the limitation period is and when it has commenced.
  • If the limitation period has almost expired, stay the claim to prevent it from expiring. This way you will be able to collect your claim in the future!
• Keep a record of your periods of limitation.

More information

Would you like to learn more about staying, filing, and collecting a claim? Or do you have any other questions about concluding or terminating agreements, please contact: