Next to payment, limitation (statute of limitations) is the most important ground for the extinction of monetary claims. Limitation means that the claim is extinguished because the creditor has waited too long to assert it. Once the claim is time-barred, the creditor loses the right to settlement. Limitation of a claim also includes interest and similar ancillary benefits.
What is subject to limitation?
Section 1 of the Norwegian Limitation Act provides that claims for money and other items are subject to limitation. Claims for delivery of property and proprietary rights cannot be time-barred, for example ownership rights or security interests. For claims secured by a pledge, the underlying secured claim is therefore not subject to limitation.
When does the limitation period start running?
The answer is found in Sections 3 et seq. of the Limitation Act. The main rule is that the limitation period runs from the day the creditor could earliest have demanded settlement, i.e. the due date. If the due date is changed by an agreement on payment deferral, the limitation start date is not postponed. However, such an agreement may be regarded as an acknowledgment of the claim, in which case a new limitation period begins to run. Whether such an agreement constitutes an acknowledgment depends on an interpretation of the agreement (see further below).
For claims arising from breach of contract, the limitation period runs from the day the breach occurs.
For tort claims (non-contractual damages), the starting point is the day the injured party obtained or should have obtained necessary knowledge of the damage and the liable party, cf. Section 9 of the Limitation Act. Case law interprets this as requiring sufficient information for the injured party to be able to bring a lawsuit for damages.
For guarantees or similar security undertakings, the limitation period begins when the guarantee can be enforced, cf. Section 7.
Length of the limitation period
The general limitation period is 3 years, cf. Section 2 of the Limitation Act. However, there are several shorter and longer limitation periods. Which applies depends on a concrete interpretation of the relevant statutory provision. For example, the limitation period for personal injury claims is 20 years from when the injury occurred, cf. Section 9 no. 2. The reason is that it may take a long time before the full extent of the injury becomes clear.
Additional limitation periods
In addition to the standard periods in Sections 3 to 9, the Act also provides additional periods in Sections 10 to 12. A practically important provision is Section 10, which grants a one-year supplementary period when the creditor has not asserted the claim due to lack of necessary knowledge of the claim or the debtor.
Interruption of limitation
A limitation period may also be interrupted while it is running. Interruption mainly occurs in two ways:
- The debtor acknowledges the claim
- The creditor initiates legal proceedings against the debtor to recover the claim
Debtor’s acknowledgment of the claim
If the debtor acknowledges the claim (before it has become time-barred), this interrupts the limitation period. This follows from Section 14 of the Limitation Act. An acknowledgment under Section 14 may be express or implied through conduct showing that the claim has not been extinguished.
Common forms of acknowledgment with interrupting effect include a promise to pay, either express or implied through conduct. Payment of interest or part of the claim is generally regarded as acknowledgment. However, if the debtor believes the entire debt has already been paid, limitation may still occur for the unpaid part of the claim.
Negotiations or settlement offers are normally not considered acknowledgment. Whether there is an acknowledgment or merely non-binding negotiations depends on an overall assessment.
If the limitation period is interrupted by acknowledgment under Section 14, a new limitation period of the same length begins to run from the acknowledgment, or from a later point in time when the creditor could first demand performance.
Legal steps against the debtor
Limitation may also be interrupted when the creditor takes legal steps against the debtor to obtain a judgment or equivalent decision regarding the claim. This follows from Sections 15 to 19 of the Limitation Act.
Where limitation is interrupted by legal action against the debtor, no limitation runs while the proceedings are ongoing.
If the claim is finally established by settlement, judgment, or other decision, a new limitation period of 10 years begins to run from the date of the settlement, judgment, or decision, or from the earliest date the creditor may demand performance. If the creditor obtains such a decision without the claim being finally and bindingly determined, the new limitation period is 3 years.
Effects of limitation
When a claim becomes time-barred, the creditor loses the right to settlement. This follows from Section 24 no. 1 of the Limitation Act. Limitation also covers interest and similar claims. For claims secured by pledge, limitation of the underlying claim has no effect, cf. Section 27 no. 3.
The Limitation Act is largely mandatory
Section 28 of the Limitation Act provides that it is not possible to agree on a longer limitation period than provided by law, a later starting point, or interruption methods other than those stated in the Act. However, it is possible to agree on extension of deadlines or that limitation shall not occur within a certain period or upon certain events.
Why do limitation rules exist?
An important rationale behind limitation rules is to give creditors a clear incentive to pursue their claims within a reasonable time. When a long time has passed since the claim could have been enforced, it may create an expectation for the debtor that the claim has lapsed—an expectation that tends to strengthen over time.
Limitation rules also prevent old unsettled claims from being enforced after a long period. After such a long time, it may be difficult to obtain evidence of the existence and content of the claim, and there are limits to how long debtors can reasonably be expected to keep receipts or other proof of payment.
