When a breach of contract occurs and informal attempts to resolve such breach are unsuccessful, a common method used to resolve the dispute involves hiring an attorney to file a lawsuit for a breach of contract cause of action against the breaching party. All causes of action in Texas are subject to various statutes of limitation. Statutes of limitation are laws that set forth the time period during which a particular cause of action may be filed. After the time period set forth in the relevant statute of limitation expires, unless an exception applies, no lawsuit may be brought.
In general, a cause of action for most breach of contract claims in Texas must be commenced within four years from the date the cause of action accrues. Section 16.004 (a) of the Texas Civil Practice & Remedies Code provides that ‘a person must bring suit on the following actions not later than four years after the day the cause of action accrues: (3) debt.’ Section 16.070 of the Texas Civil Practice & Remedies Code provides that parties to a contract may shorten this time period within their agreement to not less than two years but they may not extend the period for longer than four.
A cause of action for a breach of contract ‘accrues’ when the breach of contract occurs. A breach of contract occurs when a party fails or refuses to do something the party has promised to do and thus a judicial remedy is available for a party to seek. For example, Company A is a manufacturer of a product. Company B is a wholesaler of the same product. Company A and Company B enter into a written contract for Company A to sell 100 units of product to Company B and Company B agrees to pay $100 for each unit of product within 30 days of receipt of the product for a total contract price of $10,000.00. If, on the 31st day after delivery of the product, Company B has not provided full payment to Company A, Company B would be in breach of the Contract and a cause of action for a breach of contract claim would accrue and a lawsuit for a breach of contract cause of action must be filed in Texas within 4 years of that date.
Most businesses try to resolve disputes among themselves prior to contacting an attorney especially when the only issue is a payment that is just a few days late. However, many businesses also engage in slow pay tactics or simply put off creditors until they are seriously pressured by the creditor to enter into acceptable payment arrangements. Accordingly, it is important to immediately address any broken promises or unreturned communications of any kind. In some circumstances, it may make sense to enter into a new agreement with the other business to receive payments according to an acceptable payment schedule in which case a new contract would be created which would be subject to all the rules for breach and accrual under the applicable statute of limitation.