A claim or the right to sue can become time-barred. One of many peculiarities of the bill of exchange (1) and promissory note (2) Law are the special periods of limitation applicable exclusively in matters arising from the claim to settle a bill or note. If the debtor of a bill or note fails to pay on the due date of the documents, the bill or noteholder can enforce it through court. This right is restricted by time limits, which, should they be missed, deprive the bill/noteholder from the right to receive satisfaction on the bill/note.

Certainly in crossborder transactions, the question is to know which treaty or national law governs the contract between the creditor and the debtor. This applies to the sales contract itself as well as to the financial instruments involved in an export transaction, such as letters of Credit, Bills of Exchange etc.

The laws of bills of exchange and promissory notes in the world is divided into two legal families:

1) The Geneva system, founded on the Geneva Conventions, is accepted by 19 countries of the European Continent, including the USSR and also by Brazil and Japan.
2) The Anglo-American system applies in the United Kingdom, most countries of the Commonwealth, the United States and the other countries which found their law on the common law.

The Uniform Law, introduced by the Geneva Convention of 1930 (hereinafter the Geneva Convention), stipulates 3 types of the period of limitation for actions arising out of a bill or note. These periods are established by Article 70 and 77 of the Uniform Law or Geneva Convention.

1) All actions arising out of a bill of exchange against the acceptor are barred after three years, reckoned from the date of maturity. This period is applied with respect to the claim of the billholder, the acceptor of a bill of exchange by the drawer, endorsers, givers of aval and other persons. The same rule is applied in cases of actions against the maker of a promissory note (Article 78 of the Uniform Law). A three-year period commences on the day of maturity whether the bill or note was protested or not.

2) The Anglo-American system applies in the United Kingdom, most countries of the Commonwealth, the United States and the other countries which found their law on the common law.

3) Actions by endorsers against each other and against the drawer are barred after 6 months reckoned from the day when the endorser took up and paid the bill or from the day when he himself was sued.

Interruption of the period of limitation is only effective against the person in respect of whom the period has been interrupted (Art. 71 Geneva Convention).

 

The holder of a bill of exchange (or a promissory note) payable at a specified date or after the specified time from its date or presentment, must present the bill of exchange (or the promissory note) for payment either on the day when it is to be paid or within the next two business days.

 

The drawer may prescribe that a bill of exchange payable at sight must not be presented for payment before a named date. In this case, the period for presentation begins from the said date (Art. 34, 2nd par., Geneva Convention).

As there is nothing mentioned in the Bills of Exchange Act 1882, we must rely on other laws (statute laws) in order to determine the time limitation for bills or notes in the Anglo-American system.

 

The UK has its The Limitation Act 1980, which lays down fixed periods for bringing various categories of cases.

 

For the category of the contracts, other than personal injuries claims, section 5 of The Limitations Act, which states the Time limit for actions founded on simple contract, provides in a 6 years limitation. An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

 

Mostly the same 6 year limitation period applies in the US for contracts. But one has to take into account the federal system. Achieving uniformity in the US in an area as diverse and complex as statutes of limitation presents formidable challenges. Each state has imposed a time constraint for bringing any particular legal action and has developed rules for extending this deadline in certain situations. Contracts are generally not covered by federal law and the applicable law is that of the state in which they are located. The 1982 Uniform Conflict of Laws – Limitation Act gives guidance for the applicable law regarding time limitations.

United Nations Convention on International Bills of Exchange and International Promissory Notes, adopted by the General Assembly on 9 December 1988, is designed to overcome the major disparities and uncertainties that currently exist in relation to instruments used for international payments. The Convention applies if the parties use a particular form of a negotiable instrument indicating that the instrument is subject to the UNCITRAL Convention.

 

With regard to the time limitation Article 84 says: A right of action arising on an instrument may no longer be exercised after four years have elapsed.

The periods of time limitation differs from place to place and bussiness pleople must be aware of which law is applicable on their contracts. A difference between 3 or 6 years can be important and when ignored, may deprive the bill or noteholder from the right to receive satisfaction on his bill or note.

 

Once again, time is money.

 

Hans Verhulst
Advocate
Bar of Turnhout and Antwerp, Belgium