Prescription

From Max-EuP 2012

by Reinhard Zimmermann

1. Object and terminology

All European legal systems subject the right to performance of an obligation or the ability to pursue such a right in court to temporal limitations. They are motivated to do so primarily by the following considerations: (a) with the passage of time, it becomes more and more difficult for the debtor to defend himself against the creditor’s claim; (b) the lapse of time engenders the reasonable expectation in the person of the debtor that an incident which may have given rise to a claim can be treated as closed and that he may adjust his behaviour accordingly; and (c) legal disputes should be resolved swiftly so as not to generate a source of uncertainty, unfairness and increased cost of litigation. Thus, as well as protecting the debtor ((a) and (b)), temporal limitations are also in the public interest (c).

In English law, the object of the temporal limitation is the action; prescription is a question of ‘limitation of actions’. Such procedural understanding is by no means alien to the civilian tradition; until well into the 19th century (ius commune) longi temporis praescriptio was usually related to the right to sue. In Germany the notion of Klageverjährung gave way to that of a prescription affecting the substantive claim, ie barring the right rather than the remedy (Anspruchsverjährung), as a result of Bernhard Windscheid’s famous monograph on the Actio des römischen Civilrechts vom Standpunkte des heutigen Rechts. Many continental legal systems fell into line with this so that the substantive understanding of prescription can be described today as dominant in Europe; the main exception apart from the common law countries is France. The rules in ch 14 Principles of European Contract Law (PECL); book III, ch 7 DCFR (Draft Common Frame of Reference); and ch 10 UNIDROIT Principles of International Commercial Contracts (PICC) treat prescription as a matter of substantive law. PECL and DCFR (in line with the legal systems of the Romanistic family, as well as Scottish law) use the term ‘prescription’, a derivative of the Latin praescriptio, the UNIDROIT PICC the term ‘limitation’, derived from the common law. However, the difference is purely terminological. The UNCITRAL Convention on the Limitation Period in the International Sale of Goods uses the expression ‘limitation (of claims)’. In Germany the term Verjährung is conventional, while Dutch lawyers refer to bevrijdende verjaring. The adjective refers to the distinction established in the ius commune between praescriptio extinctiva and praescriptio acquisitiva. This broad concept of prescription, which shaped the codifications of the age of the Law of Reason, and which can also be found in Scottish law, has not been perceived as very useful in modern legal doctrine; it forms a makeshift umbrella for two legal institutions (prescription and adverse possession) each of which follows its own rules. This has also now been recognized by the draftsmen of the new French law of prescription.

Systems with a substantive understanding of prescription (which incidentally conforms to Art 10(1)(d) Convention on the Law Applicable to Contractual Obligations and Art 12(1)(d) of the Rome I Regulation (Reg 593/2008)) may nonetheless differ as to the term’s point of reference. In this respect the PECL, like German law, apply prescription to the ‘claim’, that is to the right to performance of an obligation (according to Art III.-7:101 DCFR ‘[a] right to performance is subject to prescription’). The UNIDROIT PICC, on the other hand, choose the broader term ‘rights’ and thus also subject the rights to terminate a contract, to give notice of avoidance, or to affect a legal relationship in any other way to prescription. Under both PECL and German law these latter rights are subject to cut-off periods (Ausschlussfristen) to which the rules on prescription (in particular those on suspension and interruption) are not applicable. On the other hand, under the UNIDROIT PICC prescription applies only to contractual claims, while the PECL present model rules applicable to the law of obligations in general. In contrast to German law, but in accordance with many other national legal systems (Switzerland, Nordic prescription statutes), prescription does not operate beyond the field of obligations. In particular, it does not cover claims arising from real rights.

2. Trends of international legal development

The law of prescription forms an indispensable and enormously important component of any modern legal system. Nevertheless, it has long been marginalized both in domestic and comparative legal literature. The first comprehensive modern treatise dates from 1975. Since then, academic interest has increased significantly. This is due in no small part to the fact that the law of prescription—for a long time a comparatively stable area of the law—has moved to a central position on the law reform agenda. It was increasingly recognized that the law of prescription used to be in very bad shape in many countries. Thus, for example, the Law Commission described the pertinent rules of English law as ‘incoherent, needlessly complex, out-dated, uncertain, unfair’ and inefficient (‘wastes costs’). Similarly scathing comments can be found in the German legal literature of the 1980s and 1990s. In the meantime, a number of countries have radically reformed their law of prescription, be it in the process of a comprehensive re-codification of private law, or of the law of obligations, or by way of an individual statute. In Europe, this is true for the Netherlands, Belgium, Germany, and France; in England, the Law Commission’s draft bill, published in 2001, still awaits implementation. From a comparative perspective, the reform legislation in South Africa, Quebec, and Russia is of considerable interest, as is the draft legislation for Israel. Moreover, it is widely recognized that a uniform international prescription regime, particularly in the area of the sale of goods, would facilitate cross-border trade. The aforementioned UNCITRAL Convention owes its existence to this insight. However, that Convention has been markedly less successful than the CISG (to which it relates). It is not a suitable starting point for a general prescription regime because it applies only to a limited group of claims.

A survey of the international development of the law of prescription over the past 100 years or so reveals a number of broad trends. (a) There is a clear tendency towards standardizing prescription periods as much as possible. (b) A prescription period with such a wide range of application must neither be particularly short (six months) nor particularly long (30 years); it has to be fixed somewhere between two and five years. A period of three years appears to be widely regarded as reasonable internationally. (c) The running of this relatively short general period of prescription should not be tied to an objective criterion (due date; accrual of the claim; delivery; acceptance; completion (of a building); etc); it should depend on whether the creditor knew (or ought reasonably to have known) of the identity of his debtor and of the facts giving rise to his claim (subjective system). (d) Prescription must not be deferred indefinitely; at some stage, the parties have to be able to treat an incident as undoubtedly closed. This is why a relative period (the running of which is tied to the discoverability criterion) must be supplemented by a maximum period (long stop), tied to an objective criterion, at the expiry of which prescription occurs in any case. For this long stop a period of between 10 and 30 years may be chosen; increasingly, however, a choice at the upper end of this range is regarded as reasonable only for personal injury claims. (e) It is internationally widely recognized that prescription should only have a ‘weak’ effect (this has always been the case under the German Bürgerliches Gesetzbuch (BGB)): once the pe-riod of prescription has run out, the creditor’s right is not extinguished, but the debtor is merely granted a right to refuse performance. (This is why the expression ‘extinctive prescription’, frequently used internationally, is imprecise.)

3. Specific issues concerning the law of prescription

Both the PECL and the UNIDROIT PICC reflect these tendencies (which, with certain modifications, have also shaped Arts 10 and 11 of the Product Liability Directive (Dir 85/374)). However, there are a number of differences in detail. The following account is based on the PECL, which constitute a comparative point of reference for European private law and which have, therefore, already started to play their role in the reform of the national prescription regimes (Germany, France). The DCFR (Arts III.-7:101 ff) with very minor modifications follows the model established by the PECL.

The general prescription period is three years. In principle, it starts to run when the relevant claim becomes due, ie when the debtor has to effect performance. However, the running of the period of prescription is suspended as long as the creditor does not know, and could not reasonably know, of the identity of his debtor or the circumstances giving rise to his claim. The prescription period can only, however, be extended to a maximum of 10 years or, in cases of claims for personal injuries, to 30 years. At first sight, it may appear surprising to take account of the discoverability criterion by way of suspension and to conceive of the long stop as the maximum to which the regular period of prescription can be extended, but, in comparison with the alternative model of regulation which has been chosen by the UNIDROIT PICC and German law (for each claim, two mutually independent prescription periods run, one from due date, the other from the time the party knew or could have known of the claim), it has advantages in terms of systematic coherence and burden of proof.

The PECL (and the DCFR) recognize only one exception to the general prescription period. It relates to the prescription of claims which have been established by judgment. Here, in accordance with the majority of national codes there is a comparatively long period (10 years from the judgment obtaining the effect of res judicata). A claim established by judgment is as firmly and securely established as possible and is thus much less affected by the ‘obfuscating power of time’ (Bernhard Windscheid) than other claims. Moreover the creditor has made it abundantly clear that the claim is seriously pursued; the debtor knows that performance will be still demanded from him.

A prescription period can be extended under certain circumstances (as discussed in the next paragraph). In other cases it begins to run anew. Traditionally, the prescription period was held to be ‘interrupted’ in these situations (the term is derived from the Latin interruptio temporis); today the less awkward expression ‘renewal’ is beginning to establish itself (PECL, DCFR, BGB). ‘Renewal’ occurs if, by partial payment, payment of interest, giving of security, or in any other manner, the debtor acknowledges the claim vis-à-vis the creditor. Another instance of ‘renewal’ relates to the 10-year period for claims which have been established by judgment: it recommences to run with each reasonable attempt at execution.

The prescription period can be extended by a suspension of prescription (the period during which prescription is suspended is not counted in calculating the period of prescription) or by a postponement of its expiry (the period of prescription runs its course but it is completed only after the expiry of a certain extra period). Grounds of suspension are, apart from ignorance, on the part of the creditor, of the identity of the debtor and the facts giving rise to the claim, judicial proceedings and arbitration proceedings (the DCFR also mentions mediation proceedings and even provides a definition) as well as impediments beyond the creditor’s control which prevent him from pursuing his claim (albeit only impediments which arise or subsist within the last six months of the prescription period). Negotiations between the parties about the claim or about the circumstances from which a claim might arise, lack of capacity on the part of the debtor or the creditor, and the death of either party, can lead to a postponement of expiry. The justification for extending the prescription period in most of these cases lies in the ius commune maxim agere non valenti non currit praescriptio: prescription does not run against someone who is unable to enforce his claim. Generally speaking the law should only interfere with the running of a period of prescription to the extent that it appears absolutely necessary for the protection of the creditor. Thus, as in German law, judicial proceedings and arbitration proceedings have been downgraded to a ground of suspension (rather than ‘interruption’, as was the case traditionally); and for the same reason postponement of expiry has increasingly gained ground internationally as an even milder form of interference with prescription than suspension (Germany, Greece, the Netherlands, PECL, DCFR). For all cases of suspension of prescription or postponement of expiry, except for suspension in case of judicial and other proceedings, the long stop of 10 or 30 years that has been mentioned before applies.

After the expiry of the prescription period, the debtor is entitled to refuse to perform; the claim against him is not extinguished. There is no reason for a legal system to foist protection on a debtor who is willing to perform and who may thus be taken to acknowledge the obligation to do so. For the same reasons, whatever has been performed in order to discharge a claim may not be reclaimed merely because the period of prescription has expired.

The parties are allowed to contract out of the prescription regime, both by facilitating prescription and by rendering it more difficult. And, indeed, private autonomy must provide the necessary counterbalance to (a) the short general prescription period of three years and (b) the uniformity of the prescription regime in general. However, the PECL (and the DCFR) provide mandatory upper and lower limits (30 years and one year respectively). This appears to be problematic, at least in relation to the lower limit (even if the same limit has been fixed in the UNIDROIT PICC). The new German law, on the other hand, does not limit the freedom of the parties to facilitate prescription.

4. Unitary law

A different approach has been adopted by the UNCITRAL Convention on Limitation, but it only relates to contractual claims between parties to a contract for the international sale of goods. The four-year prescription period established by that convention generally begins when the claim ‘accrues’, and it is not suspended by the creditor’s ignorance of his claim. The convention thus subscribes to the objective system. The United States is the most important state where it has entered into force; within the European Union it has, so far, been ratified only by six of the ‘new’ Member States and by Belgium. The prescription periods found in other international conventions, particularly those concerning the law of carriage, also follow the objective system; see eg the one- and three-year periods of Art 32 CMR (1956), the two-year period in Art 20 of the Hamburg Rules on the Carriage of Goods by Sea (1978) and the one- and two-year periods in Art 48 CIM (1999). All these provisions deal with further details, though in a fragmentary and inconsistent manner. For gap-filling purposes the rules of the relevant national law have to be drawn upon. Other international conventions provide cut-off periods (two years from the date of arrival at the destination, from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped: Art 29 Warsaw Convention (1955) and Art 35 Montreal Convention (1999), although their status as cut-off periods is not uncontested internationally). Concerning the directives established by the European Union, the objective system has been adopted in Art 5 of the Consumer Sales Directive (Dir 99/44); it applies to the buyers’ claims arising from lack of conformity insofar as they are covered by the directive, ie not for damages claims.

Literature

Karl Spiro, Die Begrenzung privater Rechte durch Verjährungs-, Verwirkungs- und Fatalfristen, vol I (1975); Frank Peters and Reinhard Zimmermann, ‘Verjährungsfristen’ in Bundesminister der Justiz (ed), Gutachten und Vorschläge zur Überarbeitung des Schuldrechts, vol I (1981) 77; Ewoud Hondius (ed), Extinctive Prescription: On the Limitation of Actions (1995); The Law Commission (Law Com no 270), Limitation of Actions (2001); Reinhard Zimmermann, Comparative Foundations of a European Law of Set-off and Prescription (2002) 62-169; Hans-Georg Hermann, ‘§§ 194–225. Verjährung’ in Mathias Schmoeckel, Joachim Rückert and Reinhard Zimmermann (eds), Historisch-kritischer Kommentar zum BGB, vol I (2003); Reinhard Zimmermann, ‘The New German Law of Prescription and Chapter 14 of the Principles of European Contract Law’ in Reinhard Zimmermann, The New German Law of Obligations (2005) 122-158; Reinhard Zimmermann and Jens Kleinschmidt, ‘Prescription: General Framework and Special Problems Concerning Damages Claims’ in Helmut Koziol and Barbara C Steininger (eds), European Tort Law 2007 (2008) 26; Jens Kleinschmidt, ‘Das neue französische Verjährungsrecht’ (2008) RIW 590; Bénédicte Fauvarque-Cosson and others, ‘Dossier: Réforme de la prescription’ [2008] Recueil Dalloz 2511; Michael Joachim Bonell, ‘Limitation Periods’ in Arthur S Hartkamp and others (eds), Towards a European Civil Code (4th edn, 2011) 715.

Retrieved from Prescription – Max-EuP 2012 on 25 May 2022.

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