Limitation of Actions Consultation - Law Commission

If a defendant can waive a limitation defence by not asserting it, we can see
no reason why he and a claimant should not be permitted to make a
binding agreement extending an otherwise applicable limitation period.
The effect of such an agreement may be to relieve the claimant from the
necessity of bringing an action which, in the course of events, may prove to
be unnecessary. It will frequently be mutually advantageous to the parties
if more time is available for settlement negotiations or if the defendant is
granted additional time to perform his obligations, with litigation expenses
postponed until they become essential. For these reasons, we believe that
agreements extending limitation periods for the convenience of the parties
should be encouraged. 6
14.4 We tend to agree with these views and we are inclined to think that an agreement
to extend the limitation period should be valid. On the other hand, we recognise
that the strength of the case for arguing that the parties’ agreement should not be
respected is greatest where the agreement would override a long-stop (as opposed
to an initial limitation period). In this respect, we note that under section 13
Prescription and Limitation (Scotland) Act 1973, any provision in an agreement
which purports to exclude a negative prescription is invalid. 7
14.5 A linked question is whether the parties should be free to change the starting point
of a limitation period by agreement. There appears to be no authority on this
question. The advantage of allowing this is that parties could ensure that there
was absolute certainty as to the date of the limitation period (by, for example,
saying that the limitation period should run from a fixed date), whereas under the
“discoverability” starting date within our core regime, there is no such absolute
certainty.
14.6 We ask consultees whether (assuming the agreement is otherwise valid) 8
they agree with our provisional view that it should be possible, by
agreement:
6 See Limitations, Report for Discussion No 4 (1986), para 8.3 (See also Limitations, Report
No 55 (1989), p 42), and Alberta Limitations Act 1996, c L-15.1, s 7. Similarly, the
Ontario Limitations Act Consultation Group recommended that a limitation period should
be capable of being overridden by an agreement in writing (See Recommendations for a New
Limitations Act, Report of the Limitations Act Consultation Group (1991), p 46), and the Law
Reform Commission of Western Australia recommended that it should be possible to
extend or reduce a limitation period. See Report on Limitations and Notice of Actions, Project
No 36 Part II (1997), para 18.3.
7 See Scottish Law Commission, Reform of the Law relating to Prescription and Limitation
of Actions (1970) Scot Law Com No 15, para 141.
8 An agreed limitation period (for “business liability”) that is shorter than the normal period
of limitation would be caught by the Unfair Contract Terms Act 1977 and would either be
automatically void (eg in relation to claims for negligently caused personal injury) or void if
unreasonable (eg in relation to claims between businesses for breach of statutory implied
terms). For the application of the reasonableness test to agreed time periods, see Green v
Cade Bros Farms [1978] 1 Lloyd’s Rep 602, Rees Hough v Redland Reinforced Plastics [1985]
2 Con LR 659. But an agreement to extend the statutory limitation period is not caught by
the Unfair Contract Terms Act 1977. Nor even if the Act applies (which it may not do in
relation to a clause that could both extend and shorten the limitation period) do we regard
it as at all likely that an agreement between parties of equal bargaining power to replace
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