What Statute of Limitations Applies? The Effect of the Delaware Borrowing Statute on Claims Governed by Foreign Law

March 2015

Publication| Corporate Transactions| Corporate & Chancery Litigation

Delaware courts are frequently called upon to address disputes arising under contracts governed by the laws of other states. While Delaware courts will apply the substantive law of the chosen jurisdiction in interpreting the contract unless the Restatement of Conflicts of Laws would require it to apply the law of some other jurisdiction, Delaware statute of limitations rules will apply to such claims regardless of what law applies to the substantive dispute. Several recent decisions of the Court of Chancery demonstrate the sometimes unanticipated consequences that can arise where the Delaware statute of limitations is different than that of the law governing the contract at issue, and in particular, the effect of the Delaware Borrowing Statute (10 Del. C. § 8121) (the “Borrowing Statute”) in such situations. One of these recent decisions, however, also concludes that the recent amendment to Section 8106(c) of the Delaware Code permitting parties to a contract involving at least $100,000 to extend the statute of limitations period for claims under such contract for up to 20 years effectively allows the parties to address this issue contractually.

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