The time to sue for breach of contract in Ohio is about to get shorter.
Effective June 16, 2021, O.R.C. § 2305.06 is amended to shorten the statute of limitations for claims based on a written contract from eight years to six years; and O.R.C. § 2305.07(A) is amended to shorten the statute of limitations for claims based on an oral contract from six years to four years.
A statute of limitations period is the time within which a lawsuit must be filed to avoid becoming time-barred. O.R.C. §§ 2305.06 and 2305.07(A) each state that the limitations period begins to run when “the cause of action accrued.” For a contract claim, the cause of action typically accrues when the breach of contract occurs. Thus, beginning June 16, 2021, a civil litigant will have six years from breach of a written contract and four years from breach of an oral contract to file its lawsuit.
For causes of action that accrued prior to the effective date (June 16, 2021), and which were not time-barred by that date, calculation of the limitations period is a bit more complicated. The new limitations period will expire upon the earlier of: (a) six years (written contract) or four years (oral contract) from the effective date, or (b) “the expiration of the period of limitations in effect prior to the effective date…” 2021 Ohio SB 13, §§ 4 and 5(A). Therefore, the shortened limitations periods will not retrospectively time-bar claims that remain within the limitations periods in effect at the time the claims accrued.
Shorter limitations periods make for a more favorable business climate by increasing confidence in the finality of agreements, reducing the risk of unexpected exposure to delayed claims, and minimizing costs associated with maintaining and retaining business records. Accordingly, it is common in many industries, such as the construction industry, to contract for shortened limitations periods.
While the limitations periods discussed herein apply to many contract claims, there are exceptions, such as actions against the State, actions under UCC Article 2 for the sale of goods, actions under UCC Article 3 to enforce negotiable instruments, and actions to recover title or possession of real estate. It is critical to understand the limitations period that applies to your contract claim in order to preserve your rights. Similarly, it is critical to understand the terms of your contract, which may further limit the time period within which a breach can be enforced.
If you have any questions about the terms of your contract or the applicable limitations period for bringing suit, or if you would like to discuss the impact of the impending statutory amendments on your business, please contact Bob DeBlasis at Kohnen & Patton LLP.