In some cases, it is easy to determine when the statute of limitations starts and when the time-barring occurs – typically in the case of fixed-date transactions. However, what about cases where the maturity is not fixed and depends on the creditor’s will? Until recently, there were divergent expert answers to this question. The Grand Chamber of the Supreme Court attempted to unify the relatively fragmented opinions in its decision Case No. 31 Cdo 3125/2022 of 31 May 2023.

Summary of Decision

Until now, the prevailing opinion had probably held that the subjective statute of limitations for performances for which the maturity is left to the creditor’s will starts to run from the moment when the creditor could have called for performance for the first time, taking into account the loan’s maturity.

The Grand Chamber decided to follow its previous practice, i.e. that the right with creditor-dependent maturity is subject to the statute of limitations from the moment when the creditor could have triggered the repayment. Nonetheless, in a rather surprising departure, the Chamber concluded that the statute of limitations starts to run from the time when the creditor could have called on the debtor to settle the debt for the first time, irrespective of the agreed maturity. The Supreme Court stated: “From the date on which the creditor became aware (or should have become aware and could have become aware) that they had the right to determine the time of settlement of the debt (the right to demand payment of the debt ‘immediately’), the subjective statute of limitations starts to run…” Interestingly, a creditor’s claim may become subject to the statute of limitations before it ever becomes due.

It is therefore always necessary to carefully assess when the creditor is entitled to request performance for the first time, as this date is crucial for the start of the statute of limitations, regardless of the (agreed) due date linked to the creditor’s request for performance.

Practical Implications

The aforementioned decision of the Supreme Court has several practical implications that may affect day-to-day contractual practice.

A typical case in which the repayment may be left to the will of the creditor is the lending of money to someone close to you. In the case of loans not only between close persons, the repayment period is often not agreed upon – often reduced to phrases such as “you will pay me back someday” – and is thus left to the creditor’s will. If we apply the Supreme Court’s conclusions, the creditor’s call for repayment should be made, as a precaution, within three years of the loan, or even earlier – if the creditor fails to assert their claim in court within this period, the debtor will be entitled to a statute of limitations. The creditor should also be attentive to transactions with a long-term horizon.

In the contract itself, we would recommend agreeing upon a specific maturity of the debtor’s performance, i.e. so that the performance does not depend on the creditor’s will. It is also possible to consider an elegant contractual arrangement extending the statute of limitations up to a maximum of fifteen years.

If the debtor provides the performance after the expiry of the statute of limitations, it is of course not an unjust enrichment of the creditor. Still, the creditor should not solely rely on such conduct of the debtor.

Another practical impact may be the effect on the creation of statutory provisions and the tax-effective write-off of receivables or the additional taxation of outstanding liabilities past their due dates. For example, in the case of so-called time-based statutory provisions, provisions are made based on the time that elapses after the end of the agreed maturity of the receivable. However, any such receivable must not be barred by the statute of limitations. Thus, in some situations, a receivable may become time-barred before the maximum provision can be made. A related issue is that a receivable that is barred by the statute of limitations cannot be written off in a tax-effective manner. Similarly, an outstanding debt corresponding to a receivable that has been time-barred should generally be taxed as part of the tax base. Both the debtor and the creditor should therefore have an overview of when a particular receivable is time-barred so that they can correctly reflect it in their tax base.