What are the remedies against claims for fulfillment of obligations with an expired statute of limitations?
General provisions.
What does “statute of limitations” mean?
The institute of the statute of limitations is defined as a period of time of inaction by the creditor on a claim. With the expiration of this period, the possibility of this claim being collected by compulsory procedure is extinguished. Or, to put it simply, the debtor continues to owe payment, but the creditor cannot “force” him to pay.
What are the limitation periods for the different types of obligations?
The general statute of limitations is regulated in Art. 110 of the Law on Obligations and Contracts. According to this provision
All claims for which the law does not provide another term shall be extinguished upon the expiration of a five-year limitation period.
The limitation period begins to run from the day on which the obligation should have been fulfilled.
The law also provides for some special terms for certain types of monetary claims. Such are, for example, the three-year limitation periods for:
1. claims for remuneration for work;
What does that mean? Employee X leaves work on February 27, 2019 and has one unpaid remuneration for the month of February. The employer does not pay this remuneration, but X does not seek it either. On February 28, 2021, X remembers that he has a claim for work from three years ago. He calls his former employer to invite him to pay, but the latter refuses, due to the expiration of the statute of limitations. X can file a case, but if the employer objects to the expired statute of limitations, the claim will be dismissed.
2. claims for compensation and penalties from an unfulfilled contract;
The situation is identical for this type of monetary claims.
3. claims for rent, interest and other periodic payments.
These claims are of particular practical interest, especially in the “other periodic payments” part. On the question of “which payments are periodic”, the Supreme Court of Cassation (SCC) has had occasion to pronounce with an interpretative decision.
According to the definition given by the SCC, which is mandatory for application
The concept of “periodic payments” is characterized by the fulfillment of recurring obligations to transfer money or other fungible goods, having a single legal basis, whose maturity occurs at predetermined intervals of time, and the amounts of the payments are initially determined or determinable without the periods being equal and the payments being the same.
Or, simply put, periodic payments have two distinctive features. First, it is predetermined what their size will be. Second, it is predetermined at what period of time they will be carried out. Periodic payments are all payments for utilities – electricity, water, heating. Such are also the payments under contracts with mobile operators and Internet providers.
N.B. Example of obligations with an expired statute of limitations for periodic payment.
Mr. X has not paid heating bills in the last five years – from 01.01.2014. On February 27, 2019, he receives a summons from the court, according to which Toplofikatsia has filed a case against him. And since the statute of limitations is not applied ex officio, Mr. X must make an explicit objection to the court that the statute of limitations for the bills from 01.01.2014 to 01.01.2017 has expired. Thus, the court will dismiss the claim in the part concerning the amounts due for the specified period.
According to the mandatory practice of the SCC, the installments under a financial leasing contract constitute a periodic payment and are extinguished upon the expiration of a three-year limitation period.
Protection against claims for fulfillment of obligations with an expired statute of limitations
Option 1: in case the creditor brings a claim against the debtor
In this option, it is unanimously accepted in theory and jurisprudence that the objection to the impossibility of compulsory fulfillment of obligations with an expired statute of limitations is the correct way to protect. It is of utmost importance that this objection be made in a timely manner (within the time limit for responding to the statement of claim), since, as we mentioned earlier, the statute of limitations is not applied ex officio. This means that without such an objection, the court will uphold the creditor’s claim and order the debtor to pay.
Option 2: the creditor continues to be inactive, but the debtor does not want to live “in fear” of a case being filed or wants his obligations to be “written off” because they represent obligations with an expired statute of limitations
The question of what actions should be taken in this option is controversial in theory and jurisprudence.
The most frequently used means of protection is the so-called negative declaratory action. It aims to recognize that the claimed amounts are not subject to compulsory execution, as they represent obligations with an expired statute of limitations. In this case, the dispute over whether it is correct to say that the debtor “does not owe” due to the expiration of the statute of limitations or that the creditor’s right to seek compulsory execution has been extinguished is more theoretical. The practical effect is the same – the debtor cannot be forced to pay.
There are cases when the debtor wants to pay the newly incurred obligations, but at the cash desk of Toplofikatsia, for example, an employee refuses to accept the payment without the old obligations being paid as well.
What are the possibilities?
First of all, an objection can be filed with the creditor that there are old obligations with an expired statute of limitations (such a practice exists with the National Revenue Agency). Based on this objection, an agreement can be reached between the creditor and the debtor to write off the obligations. The creditor, however, is not obliged to accept it. This is so because, although the statute of limitations has expired, fulfillment of the obligation is due. The creditor simply cannot seek compulsory execution.
Secondly, in this case, a negative declaratory action can also be filed. It should be borne in mind, of course, that this possibility is also controversial in theory and practice, but nevertheless there are numerous court decisions to that effect. The petition (the request to the court) is the same as in the protection against compulsory execution – to recognize that Mr. X does not owe payment due to the expired statute of limitations. In case the court upholds such a claim, based on the court decision, the obligations should be written off. The question of substantiating the legal interest in bringing this claim could play the role of a “pitfall” here.
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More interesting topics related to the rights and obligations provided by the laws in connection with the different types of contracts, as well as in compulsory execution, can be found in the section “Contract Law”.
Law Firm “Petkova” has extensive experience in providing effective protection in cases of compulsory execution.
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