By: Robert Young and Trisha Barfield, Carruthers & Roth P.A., and Brye Meyer (an Elon Law Student Resident)

Practitioners have likely argued – the three-year statute of limitations for contract actions begins to run when the breach occurs. Seems simple and straightforward. But what happens if the discovery of the breach occurs outside of the three years after the breach occurred? The North Carolina Supreme Court clarified how these instances should be analyzed in its 2021 decision, Chisum v. Campagna.

In that case, the North Carolina Supreme Court made it clear that “. . . a claim for breach of contract accrues when the plaintiff knew or should have known that the contract had been breached. . . .” Failing to consider this during the analysis, “. . . runs afoul of both our recent decisions, such as Christenbury, and basic notions of fairness.”

Despite there having been specific dates on which the Campagna brothers’ actions allegedly breached the Carolina Coast operating agreement and the trial court directing a verdict in favor of the Campagna brothers on that issue, Chisum was nevertheless able to reach the jury on remand for a new trial. The Court remanded on this issue because there was also evidence that supported a determination that Chisum’s discovery of the breach occurred several years later after the breach actually occurred.

While the “discovery rule” is not a new concept for personal injury or property damage claims, where the statute expressly provides for such; and, it is not necessarily a new concept for breach of contract claims, the Campagna Court acknowledged that “a number of our prior decisions have been somewhat opaque in addressing the issue that is before us in this case.”

A practice tip to possibly avoid losing a statute of limitations defense may be to advise clients to add language to their contracts that either limit the statute of limitations period or that specifically exclude the discovery of the breach as being a consideration for determining whether the claim is time-barred or not.

Finally, before you find yourself making a knee-jerk argument that your opposing party’s claim is time-barred solely based on the dates of breach and filing of the lawsuit, take care to review the Chisum case.