Tolling Agreement: What it Is and What's Included
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Civil litigation is a standard option used to seek justice when someone wrongs individuals or businesses. However, it's imperative to follow a thoughtful strategy when filing a lawsuit.
The statute of limitations sets a timeframe in which you must file a lawsuit. Not filing a lawsuit within the statute of limitations may mean you forfeit your ability to file a case.
Before you initiate arbitration, it's wise to consider a tolling agreement. A tolling agreement helps prevent disputes by suspending the statute of limitations for a period agreed upon by both parties.
What is a Tolling Agreement?
A tolling agreement is an extrajudicial agreement between two parties to toll the statute of limitations for a certain period of time. Since tolling agreements are contractual, they are crafted specifically for individual cases.
Here is an article about tolling in law.
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What Does Tolling Mean in Law?
In law, tolling refers to the suspension of a statute of limitations. It can be accomplished through an agreement between the parties or court order. Tolling is typically used in two scenarios:
- When a party is not adequately notified of the lawsuit
- When the defendant is out of the country.
In the first scenario, the plaintiff must notify the lawsuit's defendant. Suppose the defendant cannot be found or is evading service. In that case, the statute of limitations will be tolled until the defendant can be served appropriately.
In the second scenario, if the defendant is out of the country and cannot be served, the statute of limitations will be tolled until the defendant returns to the country.
Both parties must agree to its terms for a tolling agreement to work. For example, the deal will usually specify which party has to toll the statute of limitations and how long the suspension will last.
The agreement can be oral or in writing. But it's best to put the agreement in writing, so there is no dispute or breach of contract later.
Here is an article about the breach of contract.
Image via Pexels by Pavel Danilyuk
What's Included in a Tolling Agreement?
The litigation lawyers craft tolling agreements specifically for each case. But in general, a tolling agreement will include the following:
- Involved Parties. Which two parties are involved in the agreement? The agreement also specifies liquidated damages incurred by one party to the other.
- Statute of Limitations. What is the state's statute of limitations for this case? In addition, the agreement will have details of the duration in which someone must file a claim for such cases.
- Length of Time. How long will the statute of limitations be suspended? Both parties must agree on this duration.
- Duty to Toll. Which party is responsible for tolling the statute of limitations? Duty to toll means that a party is obligated to take steps to suspend the statute of limitations.
- Notice. How will the parties notify each other of any developments related to the tolling agreement? It can be done through email, fax, or even snail mail.
The tolling agreement also has information about what will happen if a party breaches the agreement. The aggrieved party has a few options:
- First, they can file a lawsuit for breach of contract.
- They can file a motion to enforce the tolling agreement.
- Finally, they may terminate the tolling agreement.
If the aggrieved party decides to file a lawsuit for breach of contract, they will need to prove the following:
- The parties entered into a tolling agreement
- The defendant breached the agreement
- The plaintiff suffered damages as a result of the breach.
Suppose you're thinking of filing a lawsuit. In that case, it's essential to speak with an experienced litigation lawyer to discuss your case and find the best strategy. In addition, litigation lawyers can help you craft a tolling agreement with all its components.
Here is an article about considerations to consider when entering a tolling agreement.
How Long Can a Tolling Agreement Last?
The tolling period can last for a set duration of time, or it can be indefinite. Both parties must agree on when the suspension will end when the course is set. Typically, the agreement tolls the litigation by 90 days or three months.
If the suspension ends and the plaintiff has not filed a claim, the defendant can use this as a defense to state that the statute of limitations has expired. Meanwhile, if the suspension is indefinite, the parties must periodically renegotiate the agreement to keep it in effect.
Here is an article about the statute of limitations for different crimes.
Benefits of a Tolling Agreement
A tolling agreement can be beneficial for both parties. The defendant can avoid being served with a lawsuit and the possibility of a default judgment.
Meanwhile, the plaintiff can buy themselves more time to investigate the case, gather evidence, and file a claim. Here are some benefits of a tolling agreement:
Encourages Both Parties to Settle the Dispute
A tolling agreement gives a deadline for both parties to negotiate out of court before the plaintiff can follow the legal process. Since most people don't want to spend time and money in court, a tolling agreement gives them the space they need to consider out-of-court settlements.
Increase Leverage for Plaintiffs
The defendant knows that the plaintiff can file a lawsuit at any time. So, they're more likely to settle faster or agree to the terms of the tolling agreement.
The plaintiff has more leverage in this situation. They can capitalize on the defendant's fear of litigation and counterclaims.
Prevents the Statute of Limitations from Expiring
When the statute of limitations expires, the case can no longer be filed in court. This is why both parties need to agree on a suspension duration. If the plaintiff waits until the last minute to file a claim
Saves Litigation Costs
Hiring litigation lawyers, filing counterclaims, and miscellaneous costs can be pretty hefty, depending on the sensitivity of the case. A tolling agreement can help prevent these costs from piling up as it steers both parties towards a formal settlement.
When parties settle out of court, they save money that they'd otherwise have to spend on attorney fees. One party has to send a demand letter to resolve a dispute in most cases.
The demand letter is a legal document that notifies the other party of the dispute and demands a resolution. The demand letter should include the following:
- The nature of the dispute
- The damages being claimed
- The facts supporting the claim
- A demand for payment or action
Alternatively, if the parties cannot resolve their dispute through negotiation, they may resort to arbitration. In this process, both parties present their case before a neutral third party, who will then make a ruling.
While crafting an arbitration agreement and finding an arbitrator incurs some costs, it's still a more pocket-friendly approach than going to court.
Here is an article about arbitration agreements.
Should I Sign a Tolling Agreement?
You should sign a tolling agreement if you want more time to investigate the case and file a claim. It will prevent the statute of limitations from expiring as you waive a right to file a lawsuit during the period specified in the tolling agreement.
You should understand the facts before signing, as tolling agreements can be used against you if the case goes to trial. It also helps to be in touch with breach of contract lawyers if the other party does not comply with the tolling agreement.
If you're the defendant, it may be in your best interest to sign a tolling agreement if the statute of limitations is about to expire. It will give you more time to settle out of court.
Ensure that you fully understand the consequences of not complying with the agreement. If you're facing a lawsuit, hiring a lawyer can help strengthen your case and increase your chances of winning.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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