Make sure that your claims don’t expire by lapse of time!
Under the law, a debt claim expires after a certain amount of time has passed (the ‘period of limitation’), in which case it becomes ‘statute-barred’. Imagine that you are owed a certain amount of money by a person or a company. This debt expires five years after the date on which it should have been paid. Once a debt has expired, i.e. become statute-barred, you can no longer collect it through the courts. However, if your debtor subsequently acquires a counterclaim against you, you can set off the two debts against each other. The same course of action is open to your debtor, of course. This is something to be aware of.
Acknowledgement or interruption
One way of preventing a claim from lapsing is by getting the debtor to acknowledge the debt. Another means is what is known as an ‘act of interruption’. An act of acknowledgement or interruption has the effect of renewing the period of limitation (i.e. five years in the case of an uncontested invoice) from the date of acknowledgement or interruption, as the case may be. Don’t forget, though, that once a debt has expired, it is then too late to either acknowledge the debt or interrupt the period of limitation. Barring exceptional circumstances, once a debt is statute-barred, this situation can no longer be reversed. An act of interruption means that you send your debtor a letter or written notice in which you explicitly reserve your right to payment of the debt.
What does ‘explicitly reserving the right to payment’ mean?
But what exactly does ‘explicitly reserving your right to payment of the debt’ mean? The highest court in the land, the Supreme Court of the Netherlands, has made clear in the past that a written notice must contain ‘a sufficiently clear warning to the debtor that he should still retain the relevant data and documentary evidence, even after the period of limitation has expired’. This would enable him to mount a proper defence at a later date.
It also needs to be absolutely clear to the debtor that you are explicitly reserving the right to payment of the debt. Simply sending him the minutes of a meeting, for example, is not enough. Although the letter or notice does not need to contain a comprehensive description of the debt, it must be clear to the debtor to which particular debt it is referring. This means that the debt must be described in such a way that it is clear to the debtor which particular right to payment is being reserved and the precise nature of the claim against which the debtor may later have to defend itself.
Does a note count as an ‘act of interruption’?
The Supreme Court recently ruled that whether or not a particular notice may be deemed to constitute an ‘act of interruption’ depends on:
- the wording of the notice;
- the context in which the notice is given; and
- the other circumstances of the case, in relation to which, and subject to certain conditions, a certain degree of significance may also be attached to other forms of correspondence between the parties.
Finally, later circumstances may also play a role in deciding whether or not a particular notice constitutes an act of interruption.
In this particular case, the notice in question was no more than a letter containing an invitation to attend a meeting. However, it was a letter sent by a lawyer to another lawyer in which explicit reference was made to the legal background of the meeting and the possibility that legal action might ensue in the future. These were sufficient grounds for the court to consider the letter as a notice interrupting the period of limitation, i.e. as an act of interruption.
My advice: be aware
Keep a close eye on the age of your debt claims and do not allow them to lapse without good reason. At the same time, be aware that a letter interrupting a time limit needs to be very carefully worded. Particularly where a large amount of money is involved, it could well be advisable to ask an lawyer to draft the letter for you.
Seek advice in good time!
If you are keen to find out whether a debt owing to you (or indeed a debt that you owe to a creditor of yours) has expired and, if so, whether you would nonetheless be able to collect the debt in question, it’s wise to seek expert advice. Our company lawyers have plenty of experience with this type of situation and can advise you on the best course of action to take.