For many clients, when they have a contract that has been breached, they are under the impression that they need to file a lawsuit against the other party immediately. In reality, you often have more time than you think to bring your lawsuit, and especially if you are running a business, there may be reasons why it makes more sense to wait to file a lawsuit.
One of the primary drawbacks to suing immediately for a breach of contract may be that you don't have all the evidence or proof that you need to submit in a lawsuit. This could be a strategic disadvantage that can easily be avoided by taking some time before you file that lawsuit. On the other side of the coin, if the breach is causing immediate harm to your business and you need relief from a court immediately, then a breach of contract may need to be filed immediately. These immediate needs may also necessitate seeking a temporary injunction as well.
When we are looking at time limits for lawsuits, the legal terminology is a statute of limitations. The statute of limitations for breach of contract dictates how long a party has to initiate legal proceedings following a breach. In Minnesota, the statute of limitations for breach of contract claims is particularly relevant for businesses and individuals navigating contract disputes.
What is a Statute of Limitations?
A statute of limitations establishes a legal deadline for initiating a lawsuit. It aims to ensure that claims are made while evidence is still available and memories are fresh. The timeline varies depending on the type of claim—whether it involves a contract, personal injury, or other civil matters. Once this period expires, the right to file a lawsuit generally lapses, making it impossible to legally enforce the contract through court action.
Statute of Limitations for Breach of Contract in Minnesota
In Minnesota, the statute of limitations for breach of contract cases depends on the type of contract in question—oral or written—and the circumstances surrounding the breach. Here is a breakdown of the time limits for initiating a breach of contract lawsuit in Minnesota:
-
Written Contracts – Six-Years: The general rule in Minnesota is that written contracts have a statute of limitations of six years from the date the cause of action accrues. This means that if a party breaches a written contract, the other party has six years from the date of the breach to file a lawsuit.
-
Oral Contracts – Six-Years: Interestingly, oral contracts in Minnesota are also subject to a six-year statute of limitations, similar to written contracts. This time frame provides an equal window for pursuing claims, even though oral agreements often present challenges in proving the terms and existence of the contract.
-
Contracts for Sale of Goods – Four-Years: Contracts that fall under the sale of goods, governed by the Uniform Commercial Code (UCC), have a shorter statute of limitations—typically four years in Minnesota. This time limit applies specifically to agreements concerning the sale and purchase of goods and is intended to address the quicker turnover and lifespan of goods as compared to services or real estate.
- Less Time if You Agree to It: You can also agree in your contracts that the statute of limitations is shorter than the time described in the law. However, you can not shorten that time period to less than a year in Minnesota.
When Does the Statute of Limitations Start to Run?
Understanding when the statute of limitations begins to run is crucial. In most breach of contract cases in Minnesota, the statute of limitations starts when the cause of action "accrues" — essentially, the date when the breach occurs. For example, if a contractor fails to deliver a service as specified in a written agreement on January 1, 2024, the six-year countdown for filing a claim would start from that date.
However, there are scenarios where a different start to accrual would apply, like the discovery rule in cases involving fraud or concealed breaches. This rule may allow the statute of limitations to start from the time the breach was discovered rather than when it initially occurred.
Things to Consider for Your Breach of Contract Lawsuit
In preparation for filing a breach of contract lawsuit, there are a few key things that you should consider. This is not a list of everything to consider, but it's a good place to start when preparing your lawsuit:
-
Importance of Contract Type: Understanding the type of contract—whether oral or written—is vital since it directly affects the statute of limitations. Businesses often prefer written contracts because they not only provide clearer terms but also allow for easier enforcement within the legal timeframe.
-
Evidence Preservation: Even though the statute allows up to six years for filing a lawsuit in many cases, it is advisable to address disputes early. With time, evidence like communication records, receipts, and witness testimonies can become harder to obtain or lose their reliability.
- Proactive Legal Action: Parties should not wait until the last minute to pursue legal action. Consulting a lawyer early in a dispute can provide clarity on the timeline, strengthen the case, and help navigate any complexities in contract law that might affect the statute of limitations.
-
Impact of Tolling: In certain situations, Minnesota law allows for the tolling or pausing of the statute of limitations. For instance, if the breaching party has taken steps to hide the breach or the other party was under a legal disability, the countdown for filing a lawsuit may be temporarily stopped until the barrier is removed.
What This Looks Like
Imagine a small business owner in Minneapolis enters into a written contract with a supplier for six monthly deliveries of raw materials. After three successful deliveries, the supplier stops without notice. The business owner attempts to contact the supplier but receives no response. After two months, the owner hires a new supplier, and operations continue.
If the business owner wanted to recover costs for the failed deliveries or losses caused by the breach, they would need to initiate a breach of contract claim within six years of the supplier’s failure to deliver. Even though the breach occurred months ago, the statute of limitations gives a considerable window to pursue legal recourse.
However, if the business owner were to wait until the seventh year after the breach, they would likely be barred from filing a claim due to the expiration of the statute of limitations. The case emphasizes the importance of acting promptly, keeping detailed records, and understanding the legal timeframes associated with contract disputes.
The statute of limitations for breach of contract in Minnesota is a critical element that can influence the outcome of contract disputes. For businesses, understanding these timelines helps in managing risks associated with partnerships, vendors, and clients. Individuals also benefit by being aware of their rights and ensuring they do not forfeit their chance for legal recourse by waiting too long.
Navigating contract law can be complex, and while the statute of limitations provides structure, other factors like the nature of the breach, discovery of the violation, and potential tolling can alter the timelines. Consulting with legal counsel can ensure that businesses and individuals make informed decisions and protect their interests when contracts are breached.
Do I Need a Business Attorney?
If you are concerned about a breach of a contract and bringing a lawsuit, let's schedule a Legal Strategy Session online or by calling my Edina, Minnesota office at (612) 294-6982 or my New York City office at (646) 847-3560. My office will be happy to find a convenient time for us to have a phone call to review the best options and next steps for you and your business.
