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Where there has been performance in order to discharge an obligation, there is no right of restitution merely because the limitation period has expired.

 

COMMENT

 

1. Time-barred claim as valid basis for performance

 

Another consequence of the fact that under the Principles the expiration of the limitation period does not extinguish the right of the obligee but can only be asserted as a defence, is that if the obligor performs despite its defence, the obligation it performs remains effective as a legal basis for the obligee’s retaining the performance. Mere expiration of a limitation period cannot be used as grounds for an action to reclaim the performance under restitutionary or unjust enrichment principles.

 

2. Restitutionary claims based on other grounds

 

Despite the lapse of the limitation period, a restitutionary claim can be based on grounds other than performance, e.g. where a payor claims to have paid a non-existing debt due to a mistake.

 

Illustrations

 

1. Bank B lends money to borrower A, who does not repay on the date required by the loan agreement. A’s debt is overlooked and forgotten because of a book-keeping error on the part of B. Four years later, B discovers its error and sends A a notice claiming repayment. A complies with this request, but later learns from a lawyer that it could have refused repayment on account of the expiration of the limitation period. A cannot reclaim the payment as unjust enrichment from B.

 

2. The facts are the same as in Illustration 1, except that A has in fact repaid the loan, but both sides are unaware of this. Four years later, B erroneously requests payment from A, and A complies. A can recover the second payment because A has already paid a debt which has thus been extinguished by full performance.

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