8 Practical Law
© 2021 Thomson Reuters. All rights reserved. Use of Practical Law websites and services is subject to the Terms of Use
(static.legalsolutions.thomsonreuters.com/static/agreement/westlaw-additional-terms.pdf) and Privacy Policy (a.next.westlaw.com/Privacy).
Contract Basics for Litigators: Illinois
The covenant of good faith and fair dealing arises most
often in contracts that give certain rights to one party
but not the other. For example, a franchise contract
may give the franchisor absolute discretion to change
the policies and procedures to which franchisees must
adhere. In that case, a franchisor can only exercise that
discretion reasonably and with proper motive and cannot
do so arbitrarily, capriciously, or in a manner inconsistent
with the reasonable expectations of the parties.
(Bonfieldv.AAMCO Transmissions, Inc., 708 F. Supp. 867,
884–85 (N.D. Ill. 1989) (applying Illinois law).) The duty
of good faith and fair dealing, however, cannot be used to
overrule or modify the express terms of a contract (Bank
One, Springfield, 309 Ill. App. 3d. at 1060).
15. What is the statute of limitations
for a breach of contract action in your
jurisdiction? Please also discuss when the
limitations period begins to run, whether
it may be tolled, and how to plead the
defense.
In Illinois, the statute of limitations for a breach of
written contract claim is ten years (735 ILCS 5/13-206;
Clarkv.Robert W. Baird Co., Inc., 142 F. Supp. 2d 1065,
1075 (N.D. Ill. 2001) (applying Illinois law)). The statute
of limitations for a breach of oral contract claim is five
years (735 ILCS 5/13-205; Clark, 142 F. Supp. 2d at 1075).
For construction contracts, the statute of limitations
is four years from the time plaintiff knew or should
reasonably have known of the act or omission giving rise
to the claim. There is also a ten-year period of repose
for construction contract claims (735 ILCS 5/13-214; see
Grahamv.Lakeview Pantry, 2019 IL App (1st) 182003, ¶ 12
(referring to the ten-year period in Section 13-214(b) as a
statute of repose).)
Apart from construction contracts, Illinois does not
generally apply the discovery rule to statutes of limitations
in breach of contract actions (Sinclairv.Bloom, 1996 WL
264725, at *4 (N.D. Ill. May 15, 1996) (applying Illinois
law); but see Hermitage Corp.v.Contractors Adjustment
Co., 166 Ill. 2d 72, 78-79 (1995); Prignanov.Prignano,
405 Ill. App. 3d 801, 814 (2010)). Unless circumstances
exist that justify the application of the discovery rule, the
statute of limitations period on breach of contract actions
accrues at the time of the breach (Milnesv.Hunt, 311 Ill.
App. 3d 977, 980 (2000)).
When a breach of contract claim accrues may depend on
the type of transaction involved. For example, where the
contract requires performance on demand the statute
of limitations begins to run from the date of demand
(Schreiberv.Hackett, 173 Ill. App. 3d 129, 131 (1988)).
The statute of limitations defense typically is asserted
either:
• As an affirmative defense in an answer to the complaint
(735 ILCS 5/2-613(d); see Rajcanv.Donald Garvey &
Assocs., Ltd., 347 Ill. App. 3d 403, 410 (2004)).
• In a motion to dismiss, in lieu of serving an answer to
the complaint (735 ILCS 5/2-619(a)(5)).
The statute of limitations for a breach of contract action
may be tolled under certain circumstances, such as:
• Continuous contracts.
• Equitable estoppel.
• By operation of a statute.
Continuous Contracts
Contracts requiring continuous performance are capable
of being partially breached, and each partial breach is
subject to its own accrual date and own limitation period
(see Hassebrockv.Ceja Corp., 2015 IL App (5th) 140037, ¶
35). This typically occurs where an obligation is payable
by installments (see Luminall Paints, Inc.v.La Salle Nat’l
Bank, 220 Ill. App. 3d 796, 802 (1991)).
Equitable Estoppel
Equitable estoppel tolls the statute of limitations where
the plaintiff’s failure to bring a timely action was caused
by the defendant’s deception or concealment of material
facts (Jasper Oil Producers, Inc.v.Dupo Oilfield Dev., Inc.,
2015 IL App (5th) 150084-U, ¶ 14 (unpublished order
under Ill. S. Ct. R. 23); Swann & Weiskopf, Ltd.v.Meed
Assocs., Inc., 304 Ill. App. 3d 970, 977 (1999)).
Statutes
Counsel also should check relevant statutes for any
applicable tolling provisions. For example:
• If a plaintiff is either under the age of 18 years or under
a legal disability when the cause of action accrues, the
plaintiff may bring the action within two years after the
person attains the age of 18 years, or the disability is
removed (735 ILCS 5/13-211(a)).
• If a defendant fraudulently conceals the cause of such
action from the knowledge of the plaintiff, plaintiff may
commence the action within five years after plaintiff
discovers that it has cause of action (735 Ill. Comp. Stat.
Ann. 5/13-215).