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IB Grant Thornton: Statute of Limitations

Statute of Limitations - Contractual relationships

The statute of limitations is one of the institutions stipulated to protect the debtor. The principle of the statute of limitations lies in the fact that once the period of time stipulated by law expires (period of limitations) the right becomes unenforceable provided that the liable party pleads it.

The statute-barred right does not cease; a court does not take the limitation by virtue of office into account; however it must take into account the legitimately raised objection to the statute of limitations. The expiry of limitation period
itself does not therefore affect the right; until the debtor raises an objection concerning the statute of limitation, the rights and obligations between him and the creditor remain unchanged.

The general provisions of the statute of limitations can be found in the Civil Code (Sections 110-114).
The limitation period of rights arising from contractual relationships is fully regulated by the Commercial Code (Sections 387-408).

Only such rights are subject to the statute of limitations according to the Commercial Code, which arise from contractual relationships governed by the Commercial Code, including the rights arising from so called mutual
contractual relationships stated in Section 262 of the Commercial Code (parties can agree that their business contractual relations will be governed by the Commercial Code).

In case of business contractual relationships between entrepreneurs which are governed only by the Civil Code the regime of their statute of limitations is shared under the Civil Code. Rights such as ownership right or right to
terminate a contract concluded for an indefinite period of time are not statute-barred even in case of business contractual relations.

The general period of limitations in commercial law is 4 years. In some cases the Commercial Code may stipulate the statute of limitations otherwise (e.g. 1 year in case of transport contract). In case of legal relationship between
entrepreneurs which is governed by the Civil Code (e.g. lease contract) the general period of limitations of 3 years applies in accordance with the Civil Code.

With the respect to rights enforceable at a court the general limitation period shall run from the first day on which the right could have been asserted at a court. With regards to rights concerning performance of an act-in-law the limitation period begins to run on the day when such a legal action might be enforced for the first time.

The date on which the statute of limitation shall commence to run is specifically regulated e.g.:

• in case of right to demand performance of an obligation – it shall start as of the day on which the obligation ought to have been performed, or as of the due date,
• in case of right to render part performance – runs separately of the due date of each part performance (if as a reason of nonperformance of a part obligation, the entire obligation becomes due, the limitation period shall run from the due date of nonperformed obligation). 

The period of limitations may be extended, even repeatedly. With respect to business contractual relationships the limitation period expires no later than 10 years after the date when it first began to run. Running of the statute of limitations does not have to be continuous as it may be suspended or interrupted.

According to the provision of Section 402 of the Commercial Code the running of the limitation period is suspended when the creditor, in order to satisfy or determine his rights, performs any act-in-law which, under the statutory provisions on judicial proceedings, is deemed to be the commencement of such proceedings, or as an assertion of the right in already initiated proceedings.

A commencement of arbitrary proceedings has the same effect. The date on which the limitation period is
suspended due to counterclaims is governed by Section 404 of the Commercial Code.

The commencement of the judicial (arbitration) proceedings shall suspend the running of the
limitation period. Legal action, rather than an execution of a verdict proposal (execution) is deemed
to be a commencement of judicial proceedings. Where a right has not been determinated upon in a judicial proceeding having caused the suspension of limitation period, the limitation period is considered as not having ceased to run.
(Section 405 Civil Code).

Even though the law does not specifically require the creditor to continue the proceedings, such a conclusion may be drawn from it. If the creditor does not continue with the proceedings, they come to an end (i.e. the court does not
decide on the merit of the case) and in this case the limitation period shall be considered as not having ceased to run; eventually the limitation period may be extended by one year if it expired during the proceedings or if less than one year remained till its expiry.

Filing a claim under the Act on Insolvency has the same effect on the running of limitation period as a legal action or another claiming of right at a court and it is to take effect since the day when it was submitted to the insolvency
court.

Where a right arising from a business contractual relationship was adjudged in judicial or arbitration proceedings, it becomes statutebarred in 10 years after the day when it first began to run as stipulated in Section 408 Paragraph 1 of the Commercial Code.

Proceedings on the verdict execution (adjudged in discovery proceedings) asserting a certain right has to initiate within 10 years starting on the day when the period first began to run, this period is in some cases with regards to Section 408 Paragraph 2 of the Commercial Code extended by three months from the day on which the decision was adjudged.

The 10-year limitation period as stated in Section 110 of the Civil Code shall not apply in case of statute-barred right adjudicated by the final decision of a court, arbitration award or compromise. The Commercial Code offers a special matter-of-fact solution. According to Section 402 and 403 Paragraph 1 the limitation period ceases to run by the commencement of respective proceedings. According to Section 408 Paragraph 1 the limitation period expires no later than 10 years from the day when if first began to run, irrespective of other provisions of the Commercial Code (including Section 402 and 403 Paragraph 1 according to which the limitation period ceased to run). The running of limitation period which was suspended and it is not determinated that it would begin to run again, shall not expireearlier than in 10 years for the right adjudged by the court decision or arbitration board.

The interruption of limitation period generally means, that a limitation period which already passed until the momentof interruption of the limitation period does not affect the newly running limitation period (the already passed
limitation period is disregarded and when the impediment ceases to exist the limitation period starts to run anew from its very beginning).

The interruption of the limitation period is according to the Commercial Code caused by the acknowledgement of a debt. If the debtor acknowledges his obligation in writing, a new four-year limitation period begins to run since the acknowledgment. The recognition of an obligation may occur repeatedly, but no later than in 10 years after the day when the limitation period first began to run.

Mgr. Zuzana Bačková
IB Grant Thornton
Na Bojišti 18
CZ-120 00 Praha 2
T +420 296 152 111
F +420 296 181 483
E z.backova@ib-gtpraha.cz