The single most common reason a good claim becomes uncollectible is that the creditor waited. Limitations periods in California are shorter than most business owners assume, and they run quietly.
The basic periods
| Type of claim | Period | Runs from |
|---|---|---|
| Written contract | 4 years | The breach — usually the first missed payment |
| Oral contract | 2 years | The breach |
| Open book account | 4 years | The last entry in the account |
| Account stated | 4 years | The date the account was stated and accepted |
| California money judgment | 10 years, renewable | Entry of judgment |
The distinction between a written contract and an open book account matters more than it sounds. On an ongoing supply relationship, the book account theory can measure from the most recent entry rather than from the first missed invoice, which occasionally rescues a claim that would otherwise be time-barred on the contract.
What restarts the clock
A limitations period is not always a one-way countdown. Under California law, certain debtor conduct can restart it:
- A partial payment on the account, in most circumstances
- A written acknowledgment of the debt signed by the debtor
- A written promise to pay, even without a new payment
This is why we ask for correspondence at intake and not just invoices. An email from the debtor's controller saying "we know we owe you the balance, cash is tight this quarter" is not a nuisance document. On an older file it can be the difference between a claim and a memory.
Tolling while the debtor is out of state
Where a debtor is absent from California, the limitations period may be tolled for the period of absence. This comes up constantly with debtors who relocate after a default. It is fact-specific and worth an actual analysis rather than an assumption in either direction.
Judgments are different
A California money judgment is enforceable for ten years and can be renewed for successive ten-year periods — but renewal must be filed before the current period expires. Miss it and the judgment lapses. We see lapsed judgments more often than we would like, usually where the creditor concluded years ago that the debtor was collectible and simply stopped watching the file. Debtors' circumstances change. Judgments should be monitored, and they should be renewed on time.
The practical advice
If a commercial debt is approaching three years old and you have not sued, that is the point to get an opinion rather than send another invoice. The analysis is quick, and the alternative is discovering the answer from a demurrer.
This article is general information, not legal advice, and it describes a fictional firm on a demonstration website. Every claim turns on its own facts.