What You Need to Know About Breach of Contract Statute of Limitations in California
Statute of limitation on contracts refers to the specific time frame permitted by the law within which a defendant is allowed to file a lawsuit. There are also key differences between the statute of limitations, or time to sue, for breaching oral contracts and written contracts. Although knowing how much time is given for filing a suit is crucial, it is not the only important thing to be aware of before entering the lawsuit process. Here’s everything you need to know about the breach of contract statute of limitations in California.
Purpose of Contract Statute of Limitations
Legislatures primarily prescribe time limits for filing lawsuits as the reliability of evidence decreases over time. The date a party makes a claim is when the statute of limitations will come into effect and may vary from state to state. The State of California recognizes that contracts are not always perfect, so issues regarding the contract may arise the need for a lawsuit to be filed. The statute of limitations is in place for the purpose of ensuring one party files for a lawsuit within a specific time period for presenting relevant and reliable evidence for their case.
Written Contracts vs. Oral Contracts
In California, there are primarily two statutes of limitations regarding a breach of contract, depending on whether the contract in question was written or oral. Each of these statutes of limitations is stated in sections 337 and 339 of the California Code of Civil Procedure.
Written Contracts
The statute of limitations for breached written contracts is four years. Written contracts are usually preferred methods of agreements, as they are easier to enforce than oral contracts, and because not every kind of agreement is enforceable unless it is written. Examples of contracts that California law deems as only enforceable through written agreement include:
- Contracts designed to take more than one year to complete
- Most real estate sales and purchases
- Commercial or residential leases that last more than one year
- Loans exceeding a specified amount of money
- Agreements that will not be completed within the promisor’s lifetime
Regardless of what type of agreement is entered into, having it in writing will most certainly facilitate enforcement compared to oral agreements.
Oral Contracts
The statute of limitations for breached oral contracts is only two years. California regards oral contracts as legally binding. In order to deem an oral contract legally binding and enforceable, the terms and agreements must be as specific as possible, and parties must ensure that there is a “meeting of the minds” whereby both parties fully understand the terms they are agreeing to. Parties involved in an oral contract will not always commit verbal agreements into a standard contract form. However, California law regards these types of agreements as just as valid as a written contract because the involved parties are agreeing to act or not to act. As a result, some written proof may be required in certain cases, such as a receipt or paper document demonstrating evidence of the oral contract.
Related: Implied Employment Contracts & Wrongful Termination in California
FAQs About Breach of Contract Statute of Limitations in California
Are there only two types of statute of limitations for breach of contract?
There is technically a third statute of limitations outlined in Section 2725 of the California Commercial Code which is applicable for cases where the contract in question pertains to the sale of goods (as defined by Section 2105 of the California Commerical Code). This statute of limitations is four years and applies regardless of whether the contract was completed in writing or orally.
When are written contracts required under California law?
There are certain situations where a written contract is actually required by California law. This is referred to as the Statute of Frauds and can be detailed in 1624 of the Civil Code.
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