Contractually Reducing the Time Period In Order To Bring Future Claims

Contractually Reducing the Time Period In Order To Bring Future Claims

by Onyinyechi Muilenburg

Texas Civil Practice and Remedies Code Section 16.070 states as follows:

(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.

I have attached a copy of the statute.  Consequently, if you are drafting a deposit agreement and/or other contract, many businesses may want to include a provision stating that the other party has only a certain period of time in order to bring their claims.  For example, such a provision could shorten a four year statute of limitation on a breach of contract claim to only two years.  Likewise, it appears that fraud claims might be able to be limited to being brought within two years.  I have seen several contracts that purport to have a one year limit, and the statute appears to bar same.  You may want to draft your contracts to state that the claim must be brought within two years and/or as otherwise allowed under the law.

No information in this article is intended to constitute legal advice.  For specific legal advice, please contact an attorney.

If you have any questions or would like more information about this statute, please contact William “Pat” Huttenbach at 713-220-9184.