Major changes to rules on statutory time limits on claims
On 9 July an amendment to the Civil Code will come into force concerning the statute of limitations. The general time limit after which claims will expire will be reduced to 6 years, while in most cases expiry will take effect from the last day of the calendar year. The rules applicable to expiry of claims of businesses against consumers will also change significantly.
Under the Act of 13 April 2018 amending the Civil Code and Certain Other Acts the rules governing expiry of civil claims of a material nature were changed. In addition to a change to statutory time limits and rules on businesses’ claims against consumers, transitional provisions laying down the rules for expiry of claims existing as at 9 July 2018 which have not expired as of that day will be of major practical importance. The amendment also makes major changes to the Civil Procedure Code (for information about this see this article).
Changes to the periods of expiry of claims
Under the general section of the Civil Code, to date there were three periods of limitation of claims:
- The general period of limitation of claims – 10 years,
- The period of limitation of claims for periodical services and the time limit for expiry of business-related claims – 3 years,
- The time limit for claims confirmed by a final and binding judgment of a court or other body that hears cases of a particular kind, or judgment of an arbitration court, and claims confirmed in an amicable agreement reached before a court or arbitration court or amicable agreement reached before a mediator that has been confirmed by a court – 10 years.
Both of the 10-year limits have been reduced to 6 years. As of 9 July 2018 these claims will expire after 6 years. These changes are presented in the diagram below:
An extra sentence has been added to Art. 118 of the Civil Code, concerning the procedure for calculating time limits of 2 years or more. These time limits are counted from the end of the last day of the calendar year. As a result, in most cases the time limits have been extended by the time remaining until the end of the calendar year.
Example: On 1 July 2018 a lender entered into a loan agreement with a manufacturer under which the lender extended a loan to the borrower of PLN 100 000 to purchase machinery needed to launch production in the business’s new factory. The loan was due to be repaid on 20 July 2018. As the claim for repayment is related to business activity, the claim expires after 3 years.
Assuming that the time limitation on the claim is not suspended or interrupted, under the former rules the time limit would expire on 20 July 2021. Under the new rules, the claim for repayment of the loan will expire on 31 December 2021.
Expiry of B2C claims
The amendment provides for different rules regarding expiry of claims in consumer relations. Art. 117 § 21 has been added to the Civil Code. According to this article, a business will no longer be able to seek satisfaction of a claim against a consumer once the period under the statute of limitations has expired. This means that as of the moment the time limit expires (and not the moment expiry is cited under the statute of limitations) the claim will become an incomplete (natural) liability. A creditor will not be able to demand compulsory enforcement of its claims. In practice, this change means that if a dispute relates to a claim against a consumer, a court will be required to examine ex officio whether the claim has expired under the statute of limitations.
Also, under Art. 1171 of the Civil Code, in special cases, a court can disregard, having considered the interests of the two parties, the time limit for the claim against the consumer, where this is in the interest of justice. When making this decision a court is required to consider in particular:
- The period after which the claim expires,
- The length of time that has passed from the moment of expiry until the moment the claim is raised,
- The nature of the facts that caused the claim not to be pursued by the rightholder, such as the impact of the conduct of the obligated party on the delay by the rightholder in pursuit of the claim.
Transitional provisions
For commercial practice, transitional provisions relating to expiry of claims which arose before the amendment took effect (before 9 July 2018) and had not expired as of that day will be of huge importance.
In general, claims of this kind will be subject to the new rules on time limits on claims (Art. 5(1) of the amendment to the act). This means above all that the time limits for claims of 2 years or more will expire on 31 December of the calendar year in question.
There will be some important exceptions to the rule of applicability of the new provisions to existing claims that have not yet expired on 9 July 2018.
Firstly, if the time limit is shorter than the time limit under the old provisions, the time limit will be counted as of the day the new provisions come into force (first sentence of Art. 5(2) of the amendment). This rule therefore applies to the general time limit and time limits for claims confirmed in a binding and final judgment or an amicable agreement approved by a court. If a time limit which began before the new provisions came into force would end sooner under the former rules than under the new rules, the claim expires according to the time of expiry under the old rules (second sentence of Art. 5(2) of the amendment). In practice therefore, determining when a particular claim expires under the statute of limitations will require calculation under both the new rules and the former rules, and comparison of the time limits.
Example: An agreement on the sale of a motor vehicle was signed on 1 March 2012. The agreement provided that payment for the vehicle was to be made by 15 March 2012. Assuming that the claim expired in accordance with the general expiry time limit rules and the time limit was not suspended or interrupted, under the former rules the time limit for the claim would expire on 15 March 2022.
As the claim for payment existed prior to 9 July 2018 and had not expired as of that day, the transitional provisions apply, and the last day of the period under the statute of limitations would be 31 December 2024.
Presently, under the second sentence of Art. 5(2) of the amendment, it needs to be established whether the claim would expire earlier under the formerly applicable rules. A comparison of the former time period and the new time period shows that the earlier date is 15 March 2022. The claim therefore expires on that date.
The other important exception is consumer claims against businesses. If claims of this kind arose prior to 9 July 2018 and had not expired as of that day, the former rules apply (Art. 5(3) of the amendment). This means that consumer claims which expire according to time limit rules under Art. 118 or 125 § 1 of the Civil Code will still be subject to a time limit of 10 years, and will not expire on 31 December of the year in question.
Legislators have also introduced a special interim regulation concerning claims against consumers. Under this regulation, with respect to claims which have expired under the statute of limitations but for which expiry under the statute of limitations has not been cited, expiry under the statute of limitations is effective from the day the act comes into force (art. 5(4) of the amendment). This means that as of 9 July 2018 a court will consider a claim of that kind to have expired under the statute of limitations regardless of the defendant cites expiry under the statute of limitations (art. 117 § 21 of the Civil Code), while a court is able to disregard expiry under the statute of limitations if the prerequisites exist which are specified in Art. 1171 of the Civil Code.
Assessment of the new legislation
The changes introduced in the new legislation will certainly be hugely important for commercial practice. The new legislation cannot be evaluated definitively however. Certain difficulties in application of the new provisions were pointed out even during public consultations concerning the government’s proposal for the bill. It was pointed out for instance that the reduction of the time limit for clams confirmed by a court judgment or amicable agreement approved by a court and introduction of different rules concerning expiry of a time limit depending on whether a time limit is less than 2 years is not entirely comprehensible. Certain doubts also arise with respect to B2C claims. Doubts have been expressed about a solution which essentially extends the time limit for claims in professional commerce. Practical problems might also arise in the application of transitional provisions.
Agnieszka Pachla, Dispute Resolution & Arbitration practice, Wardyński & Partners
Martyna Robakowska, M&A and Corporate practice, Wardyński & Partners
