Determining the appropriate statute of limitations in contract cases can be tricky. As every trial lawyer knows, in Texas the default statute of limitations applicable to a claim for breach of contract is four years. Tex. Civ. Prac. & Rem. Code §§ 16.004(a), (c), and 16.051.
As a general rule a cause of action accrues on breach. But sometimes the discovery rule can delay accrual.
And particular contracts may be governed by more specific statutes. For example, an action for breach of a sales contract has a four-year statute. Tex. Bus. & Comm. Code § 2.725. The cause of action accrues when the breach occurs regardless of the aggrieved party's lack of knowledge of the breach. Id. A breach of warranty occurs on tender of delivery. Id.
Thus, a claim for breach of contract may expire before the buyer is even aware that he has been provided nonconforming goods. In the case of a latent defect which may not manifest itself until more than four years after the sale, the claim may be barred before any damages have been incurred. Section 2.725 rejects the discovery rule except for warranties explicitly extending to future performance of goods.
A claim for default under a lease contract must be commenced within four years after the cause of action accrued. Tex. Bus. & Comm. Code § 2A.506. A cause of action for default accrues when the act or omission on which the default or breach is based is or should have been discovered by the aggrieved party. Id.
Section 2.725 and Section 2A.506 both provide that parties can by agreement shorten the limitations period to not less than one year.
While parties can, by agreement in advance, limit the time for bringing a suit on a contract to a shorter period than that fixed by the otherwise applicable statute of limitations, Section 16.070 of the Civil Practice and Remedies Code provides that a contractual provision that establishes a limitations period shorter than two years is void as a matter of law:
CPRC § 16.070. Contractual Limitations Period
(a) Except as provided by Subsection (b), a person may not enter a stipulation, contract, or agreement that purports to limit the time in which to bring suit on the stipulation, contract, or agreement to a period shorter than two years. A stipulation, contract, or agreement that establishes a limitations period that is shorter than two years is void in this state.
(b) This section does not apply to a stipulation, contract, or agreement relating to the sale or purchase of a business entity if a party to the stipulation, contract, or agreement pays or receives or is obligated to pay or entitled to receive consideration under the stipulation, contract, or agreement having an aggregate value of not less than $500,000.
Tex. Civ. Prac. & Rem. Code § 16.070.
Presumably, Sections 2.725 and 2A.506, directed expressly to sales and leases, control over the more general provisions of Section 16.070.
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