Businesses would do well to bear in mind that express contractual limitation periods can be strictly relied upon. The award-winning commercial lawyers at Bahamas law firm ParrisWhittaker are highly experienced in contract disputes and successfully representing businesses in litigation.
Commercial contracts comprise the final terms and conditions negotiated by the parties and, in the absence of clear mistake, will be taken as representing their clear intentions at the time the contract was entered into. Those terms may include a limitation period outside of which claims are not allowed.
A High Court1 ruling from the UK makes clear that limitation periods stated in a commercial contract are absolute. The ruling has persuasive authority on the courts in The Bahamas and should be noted.
What’s the background?
The defendant (‘RailPen’) sold property interests in a development to the claimants (‘Almacantar’). Almacantar brought a claim under a contractual indemnity which concerned the stamp duty land tax (SDLT) which the parties anticipated may become due to HM Customs & Excise (the UK’s tax collecting body). Under the indemnity, RailPen would pay half of any SDLT due, to a maximum of £1.6m.
The contract, dated 12 May 2011, stipulated a time limit, such that no claim to an indemnity could be made unless a notice of claim was given within 7 years of the date of the contract (ie 23 June 2018). It also stated that if a claim was to be made, court proceedings must be issued and served within six months of the claim – otherwise it would be deemed to have been waived or withdrawn.
In May 2015, HMRC determined that SDLT of £3.2m was payable. The parties had, for some years, been in discussion about the potential SDLT liability, a fact that Almacantar partially relied on in its claim. However, it was not until after 7 years had passed since the date of the contract that RailPen notified Almacantar of its claim and issued proceedings.
RailPen argued that because the indemnity was expressly subject to contractual time limits which were not met, the claim failed. It therefore sought summary judgment or strike out on that basis.
The court agreed, ruling that RailPen was entitled to summary judgment on the basis that Almacantar’s claim had no real prospect of success.
Almacantar argued, unsuccessfully, that ‘necessary amendments’ (as stated in the contract) were required which would effectively weaken the contractual time bars. Not only were such amendments not necessary, the court said they would be impractical. As it stood, the agreement was workable; and if one of the suggested amendments were included – the commercial certainty of a longstop to a financial commitment would evaporate.
What does this mean for us?
The ruling makes clear that contractual limitation periods are absolutely, and for good reason. Commercial certainty is important for both parties. Time limits provide certainty to the parties as to when they will no longer be at risk of a claim.
They also provide certainty as to what is required of a party bringing a claim. The parties must ensure
they comply with time limits stipulated in the contract, as well as any notice requirements, or risk having their claim rejected and subsequent proceedings struck out.
It is vital to ensure your commercial contracts are negotiated and finalised with the assistance of expert commercial lawyers. The specialist team at ParrisWhittaker are available to provide robust advice and representation and will also be able to guide you through any contract disputes that have arisen.
1Almacantar (Marble Arch) SARL & Anor v The Railway Pension Trust [2021] EWHC 2385
