Business Litigation in California: Statutes of Limitations

Regardless of the stage your business is in, business disputes can arise. Whether it is a breach of contract or partner or shareholder disagreement, California businesses often find themselves involved in litigation. It is crucial to note that, in California, there are laws that limit how much time a person has to file a business litigation lawsuit. These laws are called statutes of limitations. How much time is available to file a business litigation lawsuit depends on the type of claim being filed.

What is a Statute of Limitations?

A statute of limitations is a rule that sets the maximum amount of time for initiating legal proceedings. Statutes of limitations differ depending on the issue in question. Generally, the statute of limitations “clock” starts ticking on the day the event occurs or damages are discovered. Statutes of limitations serve several crucial purposes (some of which are discussed later in this article). Usually, if the specified time elapses before a party has initiated a legal proceeding, they lose their right to file the lawsuit.

Statutes of Limitations That Apply to California’s Business Litigation Disputes

Different types of business litigation disputes can arise. Each type of business litigation dispute has a different statute of limitations. The following are some statutes of limitations that apply to California’s business litigation disputes;

• Breach of contract: If the contract is in writing, the statute of limitations is four years. On the other hand, if the contract is oral, the statute of limitations is two years.
• Debt collection: A debt collection lawsuit can be filed within four years of the debtor defaulting.
• Tort claims (fraud and negligence claims): In California, the statute of limitations for a fraud claim is three years from when the fraud was discovered or should have been discovered. For negligence claims, the statute of limitations is two years.
• Libel/Slander: Libel or slander is when someone writes or says false and derogatory things about you or your business. The statute of limitations for such a case is one year.
• Legal malpractice: If, for example, an attorney or law firm fails to provide professional and competent representation in matters related to business transactions or contracts, a lawsuit can be filed against them within one year of discovering the malpractice. However, there is an overall maximum time limit of four years from the date of the alleged wrongful act or omission.

Statutes of limitations are codified in the California Code of Civil Procedure.

What is the Importance of Statutes of Limitations?

Statutes of limitations exist in business litigation and other areas of law for several reasons. The following are some of the crucial purposes that statutes of limitations serve;

• They encourage people to file lawsuits within a reasonable amount of time, thus promoting timely resolution.
• Limiting the time for filing a lawsuit helps preserve evidence. Over time, evidence can deteriorate, become altered, or disappear, and witnesses’ memories may also fade.
• Statutes of limitations promote fairness by preventing defendants from being exposed to liability indefinitely.

Contact Us for Legal Help

If you need more information or help with a business litigation lawsuit, contact the skilled business litigation attorneys at SAC Attorneys LLP.