Introduction to Virginia Contract Actions
Contract law is a vital area of the legal landscape, as contracts are at the heart of most business dealings and many personal transactions in Virginia. At its core, a contract is a legally enforceable agreement between two or more parties involving a promise to do, or refrain from doing, something in exchange for compensation or some other benefit. The U.S. legal system is both defined and shaped by the many agreements made at all levels of society. Agreements, whether made formally and written or verbally "shaking hands," develop when people choose to bind themselves to meeting certain conditions or entering into an arrangement for mutual benefit. The validity of a contract requires an offer and acceptance, capacity, consent and consideration. To put it simply, each party agrees to an arrangement in order to receive some benefit or advantage in return.
Contracts come in many forms across a wide variety of industries and contexts, and while verbal agreements can often be enforced in court, all parties to an agreement are far better served when the terms and their respective obligations are clearly defined and documented . Written contracts that are signed by all parties help to avoid misunderstandings and ensuing legal pitfalls in that they provide clear evidence for future dispute resolution, should those disputes ever arise. When a contract is broken — whether intentionally or as a result of negligence or a lack of ability on one of the pertinent party’s behalves — it is known as a breach of contract, and the injured party may be entitled to legal recourse pertaining to that breach. Breaches take many forms; for example, a person may default on a loan, fail to satisfy the terms of a real estate sale, neglect to abide by the terms of an employment contract, or violate many other types of verbal or written contract provisions. In Virginia, as in most states, the law allows for the filing of a civil suit against a contract violator for damages. Importantly, however, injured parties must bring these actions within a specified time period — a timeline that is at the very heart of the statute of limitations.
What is the Statute of Limitations?
A statute of limitations is a law that sets a maximum time period for a party to initiate legal proceedings. The basic purpose is to require parties to deal with their legal affairs in a timely manner and to prevent the indefinite threat of a lawsuit hanging over someone’s head. This concept protects both sides in our legal system, including potential defendants, who have the right to know that once a certain amount of time passes, they cannot be sued over a past incident.
When a plaintiff files a lawsuit against a party, the plaintiff must do so before the statute of limitations expires. A statute of limitations places a time limit on how long a plaintiff has to file a lawsuit. If a plaintiff does not file their claim within that timeframe, the law usually bars the plaintiff from filing a suit over that claim. Virginia law has a basis in Common Law for statutes of limitations; through statutes, certain timeframes are codified into law.
Statutes of limitations vary between states and between types of claims. There are statute of limitation laws for courts, such as civil courts, criminal courts and family courts. In addition to using statutes of limitations to place time limits on the ability for parties to bring lawsuits, jurisdictions can also have statute of repose, which places time limits on the time frame of events. A statute of repose is different than a statute of limitation. A statute of repose limits when a lawsuit can be filed, based on events that occurred in the past. In a statute of repose, the countdown clock begins when an event takes place, while with a statute of limitation, the clock begins after an event is committed.
Statutes of limitations, and statutes of repose, are in place in Virginia, as well as many other states in our country. Virginia law has certain statutes of limitations for a variety of actions. Virginia Code, Title 8.01 § 8.01-243(A)-(J) covers these statutes of limitation. Most breaches of written and oral contracts have a five-year statute of limitations, some contracts and claims have a one-year statute of limitations, a few can have a 20-year statute of limitations, and there are a couple of Virginia laws that do not have a statute of limitation.
Virginia’s Breach of Contract Statute of Limitations
Virginia law establishes a statute of limitations within which a civil lawsuit for breach of contract must be filed in order to avoid dismissal on statute of limitations grounds. The statutory limitations period for written contracts is five years, and three years for oral contracts. These periods begin running from the date of the breach, not the date on which the breach was discovered. It therefore is advisable to file suit within the limitations period even if the lawsuit is technically premature because the damages have not been fully calculated.
The distinction between written and oral contracts is important in Virginia, which has acknowledged the truth of the adage "a verbal contract isn’t worth the paper it’s written on" by providing that oral contracts are only enforceable to the extent that they are performed. In other words, any part of the contract that is not performed is not actionable. For example, if the contractor and homebuilder agree that the contractor will build a house for $125,000, identifying the house by reference to a construction plan, and the contractor actually performs all of the work called for under the plan except for the installation of the windows, the statute of limitations on a breach of contract suit by the homeowner would run on the date that the contractor completed the construction of the structure and installed the roof. The homeowner could not sue for the cost of the windows, as performance is a condition precedent to liability.
Exceptions and Special Circumstances
In some cases, special circumstances can affect the normal statute of limitations for breach of contract in Virginia.
Fraud
The basic provisions of the statute of limitations apply to fraud claims in Virginia, with one significant exception: when fraud is committed by one party in the making of a contract, Virginia law gives the defrauded party an extension to sue for breach of contract. In this situation, the period is extended to five (as opposed to three) years. This rule applies to fraud in both written and oral contracts. While fraud can increase the amount of time available for a contract claim, it must be shown that the fraud caused damage or else the fraud will not affect the statute of limitations on contract claims.
Discovery Rule
The "discovery rule" is fairly simple — "a cause of action generally accrues upon discovery of the harm or damage suffered rather than upon the commission of the wrongful act." Discovery of the harm is when the injured party knows, or by reasonable diligence should know, of the injury and its cause, and of the basis for the recovery sought in the action. This rule is limited to actions where the nature of the injury makes it difficult for the complaining party to know that he was injured. The discovery rule will not apply if the complaining party has enough knowledge, proof, or information about his injury for him to sue. This statute of limitations exception applies to fraud claims, as well as claims for misrepresentation.
Tolling Provisions
Virginia also has a number of tolling provisions that can postpone the running of the statute of limitations. Specifically, the statute of limitations may be postponed during such periods as (1) the defendant was an alien; (2) the defendant was absent from the state during the period; (3) the defendant fraudulently concealed the existence of the cause of action; and (4) the defendant was adjudicated to be insane. These tolling provisions only apply to the statute of limitations on breach of contract claims, and one never knows if they will come into play until after the statute of limitation has run. Therefore, it is critical to get in touch with a Virginia lawyers at the first sign of a problem.
Failure to Meet the Deadline Consequences
The expiration of the statute of limitations period is usually a procedural bar the defendant can invoke in the litigation to try to avoid the lawsuit. Failure to file a lawsuit within the applicable statute of limitations period can have significant consequences for the plaintiff.
The most significant consequence for the plaintiff is what’s commonly referred to as a "summary judgment." A summary judgment means that the case is over with and that the plaintiff loses. It’s a crummy outcome. All the work the plaintiff put into their case, like hiring lawyers and investigators and gathering evidence, has gone into the trash because they sat on their rights. A summary judgment is recorded as a final judgment in the court and becomes part of the public record accessible by credit reporting agencies , prospective employers, judges, and anyone else who may want to know about the plaintiff’s litigation history. The credit reporting agencies do sometimes have summary judgments reported against defendants for collection purposes. This can cause long-term damage by appearing on the person’s credit report and showing up on background checks. Credit reporting agencies also sell access to these records and many members of the public, including employers and landlords, purchase them and keep them in their own record books for screening purposes. These problems compounded together mean a case that’s too late can create long-term negative consequences for someone seeking to recover what they’re owed.
How To Avoid Statute of Limitations Issues
There are two ways that a party needs to understand statutes of limitations in order to avoid problems in litigation: when a claim must be brought by, and how a party can avoid having a claim brought against them.
2-Year Statute of Limitations
In Virginia, a breach of contract claim must be brought within the general two (2) year statute of limitations. If a claim is not brought against that party within that period, they will not be liable on that contract.
However, the two (2) year statute of limitations only runs out if you cannot bring a claim against the other party because the claim has not "accrued." To say that a claim has "accrued" means that the breach can be identified and the person with the claim is capable of making the claim. The best example of a breach that has not "accrued" is a breach of confidentiality or non-competition claim. In that situation, a person can view the noncompetition or confidentiality provision in the agreement as a one-way prohibition on the party that signed the agreement. Unless there is evidence of the one-way prohibition by the other party (for instance, a letter saying that the party with the noncompetition is going to work for a competitor), the claim has not "accrued" because the other party is not in violation of the agreement, yet.
When that claim does "accrue," a statute of limitations defense will be available.
5-Year Statute of Limitations
For claims for contractual promises, the action must be brought within five (5) years period. Parties must always be aware of what promises are being made because an additional period of time is given to the party that is owed a specific promise. That period must be understood by both parties when reviewing when a contract claim may be brought against a party.
If there is a great deal of ambiguity in a contract, or if the person bringing the claim is unsure whether the contract even makes the promise at issue, that person can seek a declaratory judgment.
A declaratory judgment is a method for a party to seek guidance from a court about the rights and obligations of the parties under a contract. In Virginia, there is a statutory cause of action for declaratory judgment, found at Virginia Code Section 8.01-184 through 8.01-191. This statute allows parties to file what essentially amounts to requests for legal advice from a court. In a declaratory judgment request, a party can ask the court to determine what liability there may be under a contract.
The declaratory judgment can be used to obtain clarity on the statute of limitations as applied to the facts and circumstances of the case.
In short, the practical advice for avoiding problems with a statute of limitations defense is to:
- Understand every promise being made in a contract, and avoid claims for breach of contract on ambiguous promises.
- Bring your claims within the applicable statute of limitations.
- If there is any doubt as to your rights or obligations under a contract, seek a declaratory judgment early to prevent any statute of limitations issues.
Conclusion to Virginia’s Breach of Contract Statute
When it comes to breach of contract claims, both Plaintiffs and Defendants must be aware of Virginia’s statute of limitations, the requirement that a lawsuit be filed within a fixed period of time. In Virginia, the statute of limitations for written contracts is five years, and for oral contracts it is three years. These timeframes, however, do not follow the same rules as other statutes of limitations, and there can be significant exceptions to these universal time limits. For instance, what may have appeared to be a written agreement between parties was ultimately deemed oral because it had not been signed by both parties. Likewise, a signed agreement that appeared to be written can actually be deemed oral if the documents were never integrated into a single final document, as was the case in a reality television show about upscale real estate agents. Other defenses include waiver, the action of the items left out of the contract, the parol evidence rule , and the venue clause. These defenses can vary from case to case, and can change the statute of limitations that applies, or even eliminate it entirely.
In sum, understanding and complying with the statute of limitations for Virginia breach of contract cases is crucial, whether you are a plaintiff or a defendant in the litigation. Before you file your suit, you should ascertain if any of the defenses listed above could apply to your lawsuit and dramatically shorten your time limit. Also, be aware that the statute of limitations in Virginia is a unique and complex area of law that can be significantly enhanced by Virginia’s equitable doctrines. Nonetheless, time limitations are strictly enforced, so after filing your lawsuit, be sure to get the evidence necessary to conclusively prove an affirmative defense and therefore stop the clock on the statute of limitations so you may move forward with litigation. This issue, like many others in Virginia contract law, is often not as simple as it appears.