(1) Expiration of the limitation period of the obligee’s rights against one joint and several obligor does not affect:
(a) the obligations to the obligee of the other joint and several obligors; or
(b) the rights of recourse between the joint and several obligors under Article 11.1.10.
(2) If the obligee initiates proceedings under Articles 10.5, 10.6 or 10.7 against one joint and several obligor, the running of the limitation period is also suspended against the other joint and several obligors.
1. Expiration of the limitation period against one obligor
The obligee’s rights against one (or several) of the joint and several obligors may become time-barred. This does not prevent the obligee from exercising its claim against the other co-obligors whose obligations are not yet affected by the expiration of a period of limitation.
1. Companies A and B are jointly and severally bound to pay consultant X fees of USD 500,000 on 1 January. A and B refuse to pay, arguing that the services rendered by X were unsatisfactory. The parties enter into lengthy discussions. Two years later, in the course of the year B comes to acknowledge X’s rights, but A continues to challenge them. In March the following year X finally sues both clients for payment. More than three years after the date when X’s fees were due (see Article 10.2), X’s claim against A is time-barred. The situation is different for B, who acknowledged the right of the obligee before the expiration of the limitation period, thus triggering the running of a new period (see Article 10.4). X can still claim USD 500,000 from B.
Co-obligors who have paid the obligee under such circumstances can exercise their rights of recourse in accordance with Article 11.1.10, even against the co-obligor who could avail itself of the expiration of a period of limitation against the obligee, in accordance with Article 10.9. These rights of recourse are subject to their own limitation periods.
2. In the case described in Illustration 1, B, after paying USD 500,000 to X, can claim contribution from A under Article 11.1.10.
2. Suspension of the limitation period against one obligor
Initiation by the obligee of legal or arbitral proceedings or an ADR procedure against one of the joint and several obligors suspends the running of the limitation period against that obligor under Articles 10.5, 10.6 or 10.7. Article 11.1.7(2) extends the effect of the suspension to the other co-obligors.
3. Co-buyers A and B are jointly and severally bound to pay seller X a sum of GBP 800,000, which was due on 31 December. In spite of several reminders, A and B are still in default close to the end of the three-year limitation period. On 20 December three years later X initiates legal proceedings against A. The limitation period is suspended not only against A, but also against B.
The rule in Article 11.1.7(2), which creates effects towards all co-obligors, adopts an approach different from that in the rule in Article 11.1.7(1), which provides for individual effects. Indeed, different effects are concerned: those of expiration of the limitation period and those of initiating legal proceedings. The solution adopted in paragraph (2) saves the expenses involved in initiating proceedings against all obligors. The obligee should however keep in mind the rule in Article 11.1.8 concerning effect of judgments.