Author(s): Karen Libertiny Ludden

This month’s Commercial Law Reporter deals with the Michigan Uniform Commercial Code’s Statute of Limitations for Economic Claims.

ABSENT A WARRANTY TO THE CONTRARY, THERE IS RARELY TOLLING OF THE UCC FOUR YEAR STATUTE OF LIMITATIONS FOR A PURELY ECONOMIC CLAIM

Many businesses plagued by random consumer complaints feel threatened by the prospect of potential legal liability for some obsolete version of a product. As long as the product constitutes a “moveable good” and no personal injuries have occurred, the Uniform Commercial Code (“UCC”), with its four-year limitations period should govern, provided there is no warranty extending liability. The four years usually begins from the date of sale and prevents someone from bringing a case more than four years after that date. Thus, while courts cannot prevent a consumer from filing a lawsuit after the limitations period has run, the right legal documents filed early in the case should get it dismissed.

The UCC was intended to provide an exclusive remedy of disputes involving “moveable goods” that do not result in personal injury. In other words, if a product sold does not meet its intended purposes – whether it fails to function or does not do what it was supposed to do, the UCC is intended to compensate the purchaser of the goods, particularly when that purchaser is a commercial entity.

Companies that are in the process of developing products, however, often begin with a particular prototype and then improve it over time as complaints come in and imperfections are noticed. Most of the time, these complaints and imperfections do not result in lawsuits. However, every once in awhile a lawsuit will be threatened.

It is important to remember that the UCC contains a four year statute of limitations, meaning that no lawsuit can be brought more than four years after the cause of action accrued. So when does the cause of action accrue? According to the UCC, a cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. In most situations, this means that the clock starts ticking at the date of sale, and is not tolled, or delayed, by circumstance.

Accordingly, even though a consumer did not know that a good was impaired, this does not mean that he has four years from the time he noticed the impairment. Rather, he usually has only four years from the point of sale of the good.

Of course, there are some exceptions to this rule, such as when a breach of warranty is alleged and the warranty explicitly extends to future performance of the goods. Under those circumstances, discovery of the breach must await the time of such performance and the cause of action accrues when the breach is, or should have been, discovered. Most of the time, however, well-worded warranties do not make this explicit statement. Therefore, under those circumstances, a breach of warranty occurs when “tender of delivery is made.”

Unfortunately, there is no way to prevent a party from filing a lawsuit more than four years after the delivery So, if a lawsuit appears on your doorstep and you can pinpoint the date of sale of the goods and locate the warranty in question, the case can be dismissed at a relatively early point in the proceeding.

Ms. Ludden is an attorney in the Troy office of GARAN LUCOW MILLER. Contact her at 248-641-7600.