• Ohio Statute Of Limitations for Written Contracts Shortened
  • July 30, 2012 | Author: Arthur J. Rotatori
  • Law Firm: McGlinchey Stafford - Cleveland Office
  • On June 12, 2012, the Ohio General Assembly passed Ohio Sub. S.B. No. 224, amending section 2305.06 of the Revised Code, which establishes the statute of limitations for actions upon a written agreement or contract. Sub. S.B. No. 224 shortens the statute of limitations for such claims from fifteen years to eight years. This bill has been signed by the Governor and becomes effective on September 28, 2012.

    The amended statute of limitations applies to claims in which the cause of action accrues on or after the effective date, September 28, 2012. Please note that in calculating the applicability of the amended statute of limitations, the relevant factor is when the cause of action accrues, not when the contract was signed. In Ohio, generally speaking, a cause of action for breach of contract accrues when the breach occurs or when the complaining party suffers actual damages. Therefore, an action for a breach of a written agreement or contract that occurs on or after September 28, 2012 must be brought within eight years from the date of the breach or it will be time-barred. Of particular importance, this amendment shortens the period of time that creditors have to sue on a debt if borrowers become delinquent on or after September 28, 2012.

    The bill further provides that when the cause of action accrued prior to the effective date of the bill, the statute of limitations is either eight years from the effective date of the act, or the expiration of the statute of limitations that was in effect prior to the effective date of the act, whichever occurs first. Under this transitional rule, if, for example, a borrower becomes delinquent before September 28, 2012, the statute of limitations expires at the shorter of either eight years from the effective date (September 28, 2020) or the previous period of limitations (fifteen years from the date of the breach).

    As a practical matter, the transitional rule distinguishes between causes of action that accrued before September 28, 2005 and causes of action that accrued on or after September 28, 2005. An action based on a breach of a written agreement that occurred on or after September 28, 2005 must be initiated by September 28, 2020 or it will be time-barred. An action for a breach of a written agreement that occurred before September 28, 2005, however, must be brought within fifteen years of the date of the breach, which will result in a deadline earlier than September 28, 2020. Thus, the bill creates a diminishing statute of limitations, and until September 28, 2020 (when the transition to the new statute of limitations will be complete), creditors must be mindful of this rule to determine the applicable statute of limitations if the cause of action accrued before September 28, 2012.

    The previous exceptions to the fifteen year period of limitations continue to apply in the amended law. For example, an action for breach of a contract for sale of goods under the Uniform Commercial Code must still generally be brought within four years.