Delaware Enacts Legislation Authorizing 20-Year Statute of Limitations for Certain Breach of Contract Actions

Delaware has recently enacted legislation authorizing parties to a written contract involving at least $100,000 to agree to a statute of limitations of up to 20 years for actions based on that contract. The amendment to 10 Del. C. § 8106, embodied in new subsection (c), gives parties to a written contract the freedom to agree to a limitations period longer than the typical three or four years from accrual of the cause of action, without the need to resort to Delaware’s technical requirements for a contract under seal. The synopsis to the legislation explains that examples of the limitations period to be stated in the contract include, without limitation, (i) a specific period of time, (ii) a period of time defined by reference to the occurrence of another event, another document or agreement or another statutory period, and (iii) an indefinite period of time.

To ensure they get the benefit of the new 20-year limitations period, contracting parties should consider not only including in their written agreements a Delaware choice-of-law clause, but also a Delaware choice-of-forum clause inasmuch as limitations periods are sometimes deemed to be procedural in nature and, therefore, governed by the law of the forum state.

In addition, although the legislation is effective August 1, 2014, depending on the circumstances, there may be an argument for its retroactive application. While the retroactive effect of subsection 8106(c) will no doubt be litigated, one thing is clear: by this legislation, Delaware has shown, yet again, its commitment to giving maximum effect to the principle of freedom of contract.

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