Limitation of Actions Consultation - Law Commission

successive and separate “once and for all” breaches of each obligation in turn on
each occasion that performance is not made. 12
3.7 In the case of anticipatory breach (or anticipatory repudiation) time runs from the
time of the anticipatory breach, that is, when the innocent party elects to
terminate the contract. Until such an election is made there is no breach. 13
3.8 The time of the breach, in the sense of the time when the creditor first had the
right to bring an action on the contract, is less clear cut in the case of contracts of
loan. Where a date is set for repayment of the loan, the cause of action will accrue
on that date. If, instead, the principal is repayable on demand - and demand is a
condition precedent to repayment - the cause of action will accrue when the
demand has been made. 14
The debtor will have a very short time after the making
of the demand in order to effect the mechanics of payment before being in
default. 15
Where, however, there is no date laid down for repayment, and
repayment is not conditional on demand, the cause of action will accrue, at
common law, when the loan is made. 16
But section 6 of the 1980 Act 17
amends
this common law rule so that, where there is a written demand for repayment, the
cause of action to recover the debt will be deemed to have accrued on the date of
the demand, and section 5 will apply accordingly. 18
3.9 There may also be problems in determining when the cause of action accrues in
relation to contracts of guarantee, or contracts of indemnity. Generally, with
respect to contracts of guarantee, the cause of action against the guarantor will
accrue at the same time as the accrual of the creditor’s cause of action against the
debtor. 19
This will usually be the case where the guarantee is in the form of a
12 See National Coal Board v Galley [1958] 1 WLR 16, 27 - 28 (CA); J W Carter, Breach of
Contract (2nd ed, 1991) p 426, para 1140.
13 See Chitty on Contracts: General Principles (27th ed 1994) para 28-022; J W Carter, Breach of
Contract (2nd ed 1991) pp 216 - 220 and 237 - 240. There appears to be no case in which
this principle has been considered in relation to limitation periods.
14 Lloyds Bank Ltd v Margolis [1954] 1 WLR 644, 659.
15 Bank of Baroda v Panessar [1987] Ch 335. It has been suggested that it may be about an
hour: T Prime and G Scanlan, The Modern Law of Limitation (1993) p 84. An hour was
held to be sufficient in Bank of Baroda v Panessar.
16 See Re Brown’s Estate [1893] 2 Ch 300, 304. And where the principal is repayable (without
demand) when interest is overdue by a given period, the cause of action will accrue on the
expiry of that period : Reeves v Butcher [1891] 2 QB 509.
17 Enacted on the recommendation of the Law Reform Committee Twenty-First Report (Final
Report on Limitation of Actions) (1977) Cmnd 6923, pp 36 - 39. The Law Reform
Committee recommended the enactment of the provisions contained in s 6 because of the
perceived unfairness of the operation of s 5, in conjunction with the common law rules as
to the date of repayment of debts, in non-commercial transactions.
18 For a recent application of the section see Boot v Boot (1997) 73 P & CR 137. Section 6
will not apply, however, where the debtor enters into a collateral obligation to pay the debt
(such as a promissory note) on terms that would exclude the application of the section if
they applied directly to the repayment of the debt: s 6(2).
19 Where the guarantor takes an assignment of the debtor’s cause of action against a third
party, time will run from the moment when the debtor could have commenced an action
against that third party: see, Tabarrok v E D C Lord & Co (a firm), The Times, February 14
1997 (CA).
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