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What you need to know: Claiming for payment of invoices

Picture of Beth Horsham

By Beth Horsham, Gena Ritchie

19 Apr 2023 | 1 minute read

The Court of Appeal has upheld the decision to strike out a breach of contract claim worth $50 million on the basis that proceedings were commenced more than six years after the cause of action first accrued. Under the Limitation Act 1980, the time limit for bringing a claim under a simple contract is 6 years from the date on which the cause of action first accrued. The usual 6-year limitation period can only be altered by a 'special term' using 'clear words'.

It is therefore important to identify the point at which a cause of action first arises: In a claim for payment of a debt in respect of the provision of services, does the cause of action arise when the services are provided, when an invoice is issued, or when payment under the invoice is due? The Court of Appeal considered this issue in the case of Consulting Concepts International Inc v Consumer Protection Association (Saudi Arabia).

Background of the case

A New York based consultancy company, Consulting Concepts International (“CCI“), contracted with a consumer protection body, Consumer Protection Associations (Saudi Arabia) (“CPA“) in June 2013.

The contract, whereby CCI was to provide research and other consultancy services to CPA, specified that CPA would pay CCI’s invoices within 90 days.

On 27 December 2019, CCI issued a claim against CPA in respect of unpaid invoices for the services provided under the terms of the contract.  All of the invoices had been submitted to CPA by CCI before 27 December 2013, i.e., the date six years before the claim was issued, and related to services provided to CPA before that date.  However, the 90-day payment period expired after that date for all but one of the invoices.

CPA successfully applied to strike out the claim on the basis that it was time barred, arguing that the cause of action accrued on the date that the services were completed, rather than (as CCI asserted) on the date 90 days from the date of each invoice.

Judgment

The Court of Appeal upheld the decision to strike out the claim, holding that under section 5 of the Limitation Act 1980, a cause of action first accrues when a right to payment arises, not the date on which payment under an invoice becomes due (unless specific special terms to the contrary are included in the contract, in which case it would be a matter of construction of the contract).

In reaching its conclusion, the Court of Appeal considered the general principal in Coburn v Colledge which provides that, absent terms to the contrary, a right to payment arises as soon work has been completed.

Take away points

Firstly, when thinking of bringing a claim for breach of contract, claimants will need to identify the date on which works were completed or services were performed. This is not always an easy task, especially where the relevant date falls some years prior to the issuing (or potential issuing) of a claim.

Best practice is therefore to adopt a conservative approach and consider the contract date, or the start date of services if earlier than the contract date, as the relevant date to avoid limitation arguments. A note should be kept of this date, and of the (potential) expiry of the limitation period six years later, and where appropriate, reminders with appropriate lead in periods added to key stakeholders' diaries.

Secondly, service providers should promptly issue invoices after work has been completed, and should always record the date on which work was completed. This will help avoid disputes in relation to time limits arising.

Finally, if you are the customer under a contract, you might want to consider adding carefully drafted 'special terms' using 'clear words' to extend the limitation period, providing yourself greater time to bring a claim.

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