Breach of contract - contractual time bars
Under normal circumstances, the Limitation Act 1980 provides that a claim for breach of contract must be made within six years from the date of such breach. If the contract is executed as a deed, the limitation period is extended to twelve years.
Often, contracts will specify that a shorter limitation period will apply. In order for such a term to be effective, it must be “reasonable”. The test for reasonableness is set out in the Unfair Contract Terms Act 1977 (“UCTA”). Whether a term is reasonable or not will largely depend on the relative bargaining power of the parties to the contract. As a result, limitation clauses in contracts negotiated between two sophisticated commercial entities are unlikely to be challenged by the courts and the parties will be free to negotiate any period less than the statutory limitation period.
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