Amendment to Delaware Judicial Procedure Law Permits Parties to Extend Statute of Limitations for Breach of Contract Claims
Pursuant to an amendment to Section 8106 of the Delaware Courts and Judicial Procedure Law, effective as of August 1, parties to a contract may agree to extend the statute of limitations for up to 20 years for a breach of contract claim. The default rule under Delaware law provides that a general breach of contract claim is subject to a three-year statute of limitations. Prior to the amendment of Section 8106, parties to contracts could extend the statute of limitations for 20 years only by executing contracts under seal, which required parties to take specific ministerial actions in connection with the execution of the contract. Acquisition agreements often include extended survival periods beyond the default three-year statute of limitations (e.g., for breaches of “fundamental” representations and warranties and covenants), which may not have been enforceable under Delaware law prior to this amendment if not executed under seal. Under Section 8106, as amended, parties may now extend the statute of limitations without executing under seal so long as the contract involves at least $100,000 in value. Further, Section 8106 provides that the parties may agree to a statute of limitations of less than 20 years, which is not necessarily permitted if a contract is executed under seal.