You loaned your neighbor money and somehow he’s reluctant to pay it back? What deadlines do you have to watch out for so that your claim is not time-barred? Is there any way to recover a time-barred debt, and does returning a time-barred debt constitute unjust enrichment? And what about the limitation of other rights? We look at all this in today’s article.
When we use the expression, it’s “time-barred” in ordinary speech, we mean that something is past and there is no point in mentioning it at all. However, the legal meaning of the word is slightly different. Limitation is a legal institution that only weakens a right after the expiry of the so-called limitation period. As can be seen, the right in question is not extinguished; the weakening in question consists in the fact that if the statute of limitations is challenged before the court, the court must take it into account and cannot force the debtor to fulfil his debt. However, if such an objection is not raised before the court or if the debt is voluntarily discharged, there is no unjust enrichment.
The statute of limitations can be confused with the so-called prescription, which works similarly, with the main difference that after a certain period of time, the right in question is extinguished completely and your claim is extinguished with it. If a debt that is subject to this limitation is discharged, this would constitute unjust enrichment on the part of the creditor. In contrast to limitation, the court will also take the limitation into account automatically, i.e. even without a plea of limitation.
And how do we know which right is subject to limitation and which to prescription? It is relatively easy, the rule is to apply the statute of limitations. Only those property rights that are expressly provided for by law are subject to prescription. A typical limitation period that we commonly encounter is the period for product complaints.
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In the context of limitation, there are two types of time limits: subjective and objective. As the name implies, in the case of a subjective period, a certain circumstance of which we knew, or should have known and could have known, is important for its commencement. For example, in the case of damages, it is important for the start of the limitation period to have knowledge of the damage and of the person who caused it.
By contrast, the objective limitation period is independent of our perception and starts to run, as a rule, from the date on which the relevant right arose. The period is therefore completely independent of your knowledge of the relevant facts concerning your claim.
The general subjective limitation period under the Civil Code is three years and the general objective limitation period under the same provision is ten years. However, it is not the case that some rights are subject to subjective limitations and others to objective limitations. The subjective limitation period runs, as a rule, within the objective limitation period. In the example of damages mentioned above, as a creditor, you may theoretically not become aware of the damage until ten years later. In that case, the subjective limitation period will no longer start to run, as the objective limitation period has already expired.
Tip: We have defined the general principles governing compensation in our article.
In some situations, the law specifically provides for a different subjective limitation period. For example, in the case of insurance, the right to claim insurance benefits is time-barred after ten years.
However, if you start to claim your money in a legal proceeding during the limitation period, and you continue the proceeding properly, the limitation period is thereby suspended, i.e. it does not run for the duration of the proceeding.
How would the running of limitation periods work in practice? Let us go back to the loan to the neighbour mentioned above. Let’s start from the assumption that you have agreed that he will repay the whole amount to you in full, within two years at the latest. The limitation period in this case will be three years. However, the neighbour does not have to make any repayment himself, he only promises to repay everything soon after the two years have elapsed. Suddenly you are horrified to discover that three years have already passed since you lent him money. But you have nothing to worry about. The statute of limitations only started to run after the two years, i.e. from the time when it should have been repaid. So after a total of five years, the debt will be time-barred.
However, if you had not agreed on any time limit for repayment and your neighbour had only promised to “pay it back soon”, then the three-year limitation period will start the day after the debt was incurred.
Acknowledgement of the debt is also a possible protection for creditors. It does not require any special formalities, it is sufficient if the debtor identifies and acknowledges the debt to a certain person in a certain amount. This establishes a new 10-year limitation period, which runs either from the date of the note or from the newly established maturity date. The acknowledgement of debt may be repeatedly drawn up, thereby extending the limitation period further, perhaps indefinitely.
Tip: We can also talk about the statute of limitations for criminal offences. However, this concept has a separate legal regulation in the relevant laws
The general rule set out in the new Civil Code is that all property rights are statute-barred unless the law provides otherwise. The opposite applies to other rights: these rights are not time-barred unless the law specifically provides for it. Exceptions that are expressly mentioned in the CCC are, for example, the right to maintenance, which is not time-barred, but rights to individual benefits are subject to limitation.
The right of ownership, the right to demand the division of common property, the right to establish a necessary road or the right to redeem a real burden are also not time-barred.
The law further states that in the case of the right to life and dignity, name, health, respectability, honour, privacy or a similar personal right, only rights to compensation for damage caused to those rights are time-barred.
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