Prescription and limitation of claims in world wide design contracts


A defendant’s circumstance can be handicapped owing to fading memories, missing documents, personnel attrition or expired prospects for related proceedings, to title just a handful of factors. This is especially significant in the development industry where by disputes are normally contractually complex, highly truth-intense and exactly where a lot of personnel are employed on a job-to-undertaking foundation, relying on the place their techniques are most valued at the time.

It is really tough to protect statements when the persons who ended up when associated in the undertaking are no lengthier offered to provide evidence and directions. This fascination of fairness is not engaged exclusively in the development and engineering infrastructure fields, it applies a lot more broadly in civilian and industrial existence. And it is why lots of jurisdictions close to the world incorporate extinctive prescription or restrictions of steps laws.

There are, however, downsides to limitation intervals. In some jurisdictions wherever the time period for action is equally fixed and somewhat short, a social gathering may perhaps have its hand pressured into commencing litigation or arbitration in order to maintain its legal rights even in instances exactly where such a move is premature. For instance, the functions could be engaged in constructive settlement conversations or different dispute resolution processes which, if authorized to run their system, could prevent the want for litigation or arbitration.  

Below are the approaches to limitation of actions and the extinguishment of rights taken in Australia, Germany and South Africa and some handy ideas for controlling these hazards. 


In Australia, legislation in just about every of the states and territories stipulates the time within just which proceedings must be introduced. For a breach of contract circumstance, the period runs for six many years in most, but not all, Australian jurisdictions. Time starts to run from the day of the breach and is stopped upon the submitting of a writ or other originating motion, or the commencement of arbitration wherever that is the agreed mode of resolution. Time may well commence to run even before the likely claimant has information of the bring about of action.

Read through additional on building and engineering hazard administration

In all those many common legislation jurisdictions, this kind of as people in Australia, wherever the related legislation does not prohibit ‘contracting out’, limitation periods do not extinguish legal rights per se, nor do they stop a bash from commencing litigation or arbitration following the limitation interval has expired. In its place, the defendant may possibly plead it as a whole defence to the induce of action. For the reason that a bring about of motion is not extinguished by the statute – fairly, the statute confers a particular proper on the defendant to plead such a defence if it so chooses – the defendant may possibly elect not to count on these types of a defence.

This may well happen if, for instance, it has entered into some contractual arrangement in which it has agreed not to rely on the statutory limitation defence possibly prior to the dispute arising in the primary agreement or by subsequent settlement. The Substantial Court docket of Australia has formerly verified the enforceability of such an agreement, even where by the statute does not expressly allow the lengthening or shortening of limitation intervals by agreement. This is not to be bewildered with the circumstance exactly where there are statutory time boundaries which the court must utilize strictly and which it has no discretion to lengthen.


In Germany, generally talking, promises are matter to a normal federal statutory limitation time period of three years. This interval commences at the stop of the calendar year in which the assert arose and in which the appropriate occasion became conscious or should to have come to be informed of the situation offering rise to the claim. Inside specified limitations, parties are, in principle, no cost to contractually present for shorter or extended periods. Special statutory limitation periods are foreseen, for instance, in the function of ‘dishonest’ conduct or with regard to promises primarily based on injury or dying.

German statutory legislation also gives that specific functions will guide to a ‘suspension’ of the limitation period of time, halting it from working and thus effectively extending the time out there to initiate ‘formal’ proceedings. One such function is negotiations between the parties, which simply calls for that there are exchanges involving the parties relating to the assert in question or the situations fundamental the claim. In this way, the solution taken in Germany avoids the draw back mentioned above, that functions may possibly be pressured to commence proceedings even if they are participating in effective settlement conversations. Even further, the graduation of litigation or arbitration suspends any applicable limitation period. 

The legal consequences of the expiry of any limitation period are rather related to the types set out over in relation to the frequent legislation posture: claims do not instantly expire right after the lapse of the limitation time period, and the respective party is furthermore not prevented from asserting a time-barred declare in any litigation or arbitration proceedings. Somewhat, German statutory regulation entitles the counterparty to increase a defence in opposition to any time-barred declare, which would then protect against the enforcement of the claim.

However, a time-barred claim may perhaps continue to be set off against any payment claim, furnished the established-off scenario – the existence of the respective declare and ‘counterclaim’ – arose prior to the lapse of the applicable limitation period. In addition, to the extent that an amount of money forming part of a declare that subsequently results in being time-barred experienced presently been lawfully retained, it have to not be returned. What’s more, protection legal rights ‘in rem’ keep on being enforceable even the place the secured declare has develop into time-barred.

South Africa

In South Africa, the countrywide parliament physical exercises distinctive legislative electricity in the realm of civil and industrial laws. The Prescription Act 68 of 1969 caps the lifestyle of monetary promises of all sorts by means of extinctive prescription. The rules of prescription are codified in the Act having said that, they are nonetheless evolving by signifies of South Africa’s widespread legislation program of case legislation. 

Extinctive prescription, as defined in the Act, dictates that, matter to many significant (and historical) exceptions, selected obligations may well be extinguished, or rendered unenforceable, by the lapse of time, unless of course they are issue to proper lawful proceedings ahead of the applicable deadline. Not all rights of action give increase to a “debt” for purposes of the Act, meaning that not each proper to approach a courtroom for relief will quantity to a debt for the applications of extinctive prescription. An everyday civil financial debt, including liability arising from and being thanks or owing below a agreement, is frequently extinguished immediately after the lapse of a few yrs and this interval commences to operate as shortly as the debt is, objectively, thanks. 

South African courts have made it apparent that a credit card debt which has approved is not capable of resurrection, either in conditions of the Act or by the courts themselves. The consequence of this is that any debtor sued in respect of a approved declare will be entitled to raise a certain defence of prescription which would most likely dispose of the result in of action solely. 

The main process by which prescription is interrupted is for the creditor to sue its debtor in courtroom. The Act also recognises that the establishment of arbitration proceedings will suspend, not interrupt, the functioning of prescription. This is an important difference: a courtroom summons will finish the running of the prescription period while arbitration proceedings will only suspend the working of that time interval. It is hence vital that lenders recovering their debts by way of arbitration be certain that they finalise their proceedings and enforce their legal rights in terms of any award specified in their favour. 

Parties also usually locate by themselves sure by contracts which have multi-tier dispute resolution clauses, necessitating mandatory adjudication or mediation prior to arbitration can be commenced. The courts have confirmed that a multi-tiered dispute resolution treatment could represent “arbitration” and as these types of suspend the managing of prescription. Appropriately, a dispute resolution clause will be considered in its entirety when taking into consideration questions of prescription and how it preserves a disputant creditor’s legal rights. 

Managing prescription and limitation period of time hazards

All get-togethers must hold a close eye on the applicable prescription or limitation periods. This is not as uncomplicated to do as it may possibly seem to be, especially where by the challenge will involve a mixture of applicable sources of legislation. Regretably, for quite a few claimants, the quite existence of the risk will come as a shock.  An early, assumed-as a result of prepare based on sturdy lawful suggestions that navigates the strategies in way that avoids ‘statute barring’ will be essential for the survival of cures.  

Usually, it is prudent to request to extend the applicable time period by arrangement. Where the period is short, it is greatest practice – the place the applicable legislation permits – to concur this at the outset when agreeing the phrases of the construction contract. Leaving this right until later on, when a assert is most likely, will diminish the probabilities of settlement, primarily when one or a lot more parties are favoured by the before expiry. 

Make certain good and ongoing compliance with notification and other obligatory communication requirements less than the agreement, which includes any early warning or impression demands. This can assist to detect claims at the earliest chance so that any possible disputes can be fixed sufficiently early.

Handling challenges arising from a decrepit case

The danger of a ‘decrepit’ scenario stays until all statements have been at last settled or identified and until finally the most up-to-date feasible prescription or limitation period has expired. If a dispute is brewing, when memories are clean and personnel are still employed and engaged in resolving the prospective trouble, those people with know-how of the job and the issues likely to come up in dispute really should publish up a assertion based mostly on the critical concerns as determined by an expert lawful adviser.

Thorough information really should be developed through the study course of the task. It is typical for documents to be misplaced by way of the passage of time, especially when data are moved from internet site, like neighborhood task servers, to a centralised location or server. Make positive data are secured, organised, and not destroyed till at minimum the passing of the longest limitation period of time that is likely to utilize. It is also important to guarantee that site and other advertisement hoc guidelines are recorded and documented to keep away from afterwards evidential contests over who set what.

Navigating the hazards

No claimant enjoys staying compelled into commencing litigation or arbitration just in buy to preserve their rights in the confront of an impending statute barring. Having to do so frustrates the quite reasonable aims of amicable dispute resolution, disrupts source scheduling in a commercial company and destabilises business approaches. But, invariably, extinctive prescription and limits of steps regulations use across the spectrum of civilian and commercial lifestyle – not basically muti-yr infrastructure projects – and are seldom changed.

Individuals in the development and engineering infrastructure fields will fare very best by navigating them conscientiously, and that commences with recognition based on sound authorized guidance and strategic planning.