A Tolling Agreement is an agreement between two or more parties to a lawsuit, or a potential lawsuit, where the parties agree to “toll” or “suspend” certain rights, rules, or claims that typically govern legal actions. Some common rights, rules, and claims that may be mutually suspended by both parties include, the statute of limitations and statute of repose.
The agreement identifies and acknowledges the legal time limits which typically govern when lawsuits or crossclaims must be filed. In recognition of a looming time limit, tolling agreements:
- Toll, or suspend, the statute of limitations and the statute of repose time restraints governing an agreement; and
- Provide a mutual agreement between parties, where they both agree to give up their right to use the statute of limitations or the statute of repose as a defense against a lawsuit or crossclaim, should a suit be filed or pursued at a later date.
Additionally, a tolling agreement will identify the following elements:
- Party Information: identity of the parties to the agreement;
- Start Date: the date the agreement is effective;
- End Date: the date the agreement expires or terminates;
- Intent Not to Sue: an agreement promising not to commence litigation during the pendency of the tolling agreement;
- Declaration of No Liability: a clear statement indicating no admission of liability by any party;
- Neutrality Statement: a statement affirming the agreement is not for, or against, any party;
- Waiver of Time-Based Defenses: an agreement that no party shall plead, assert, or claim any time-based defenses which may pass during the tolling period;
- Extension Agreement Date: the date by which any agreement for an extension to the agreement must be reached; and
- Party Signatures: the signatures of the relevant parties.
For definitions of the statute of limitations and the statute of repose, as well as an illustration of how they may be relevant, please see the FAQ section.
A tolling agreement in no way concedes guilt, responsibility, or liability. Nor does it waive a valid claim regarding the statute of limitations or the statute of repose before the agreement is put in place.
The only right a tolling agreement impacts is a party’s right to argue too much time has passed during the tolling period for a suit to proceed.
When a Tolling Agreement is Needed
There are many reasons one might benefit from a tolling agreement. Usually, tolling agreements are used in order to give parties extra time to assess the validity and legitimacy of claims and damages, without having to file actions within the requisite timeframes. Other common reasons include:
- Providing certainty as to the statute of limitations or statute of repose;
- Providing certainty as to the final date a suit may be filed;
- Strategic benefits for plaintiffs; and
- Strategic benefits for defendants.
Providing Certainty as to the Statute of Limitations or Statute of Repose
The statute of limitations is a law providing for the length of time one can bring a claim after the occurrence of an alleged offense, such as collecting a debt; suing for medical malpractice; or pursuing a contract dispute. Statute of limitations timeframes vary by state, causing uncertainty for a great deal of litigants as to the time when the actual statute of limitations begins.
In most circumstances, the statute of limitations begins when someone knows, or should have known, they had a legal claim. Imagine a case where a medical instrument is inadvertently left inside a patient. Should the statute of limitations begin when the patient first feels pain from the foreign object? When they develop an infection? When they should have gone to the doctor? Or, when they actually went to the doctor?
By entering into a tolling agreement, there is no dispute between parties as to the appropriate “end date” of certain claims and rights. Nor do they risk an unfavorable ruling by the court. Instead, the parties can focus on the merits (or lack thereof) of a potential suit, and working towards a possible resolution.
Tolling agreements do not waive valid arguments for a previously expired statute of limitations or repose, only for those during the tolling period.
Providing Certainty as to the Final Date a Suit May be Filed
A tolling agreement details several facts surrounding the date the suit may be filed. In addition to establishing an agreement to suspend the statute of limitations and the statute of repose, a tolling agreement includes an “end date.” The parties agree to waive the statute of limitations and the statute of repose in agreement and that no suit will be filed after a certain date, or after a certain condition is met.
This waiver allows for the parties to engage in an investigation and evaluation of the strength and weaknesses of the opposing party’s case, and their own, allowing for more meaningful negotiations.
Strategic Benefits For Plaintiffs
Plaintiff’s benefit from tolling agreements because they are able to extend the time they have to investigate and gather evidence to support their claim. Without a tolling agreement, and lacking sufficient facts to support an actionable claim before the statute of limitation expires, a plaintiff may forever lose their chance to file a suit.
Strategic Benefits For Defendants
Often times, causes of action are settled between parties without a suit ever being filed in court. Court filings are public and contents of certain lawsuits can be incredibly damaging to a defendant’s reputation or business. By signing off on a tolling agreement, a defendant can pursue settlement off the record. Without one, a plaintiff may have no choice but to file suit to preserve their claim.
Co-defendants may also use tolling agreements when dealing with counterclaims. Counterclaims can include crossclaims and third-party claims. Sometimes, before pursuing a counterclaim against a co-defendant, defendants want to take time in order to determine the strength of a plaintiff’s case to see if the plaintiff can establish any liability.
Less Common Situations for Tolling Agreements
Some less common situations involving tolling agreements include:
- Cases where some, or all, of the alleged conduct involved a juvenile plaintiff;
- Some bankruptcy proceedings; and
- When natural or other disasters occur.
If either the statute of limitations or the statute of repose has any chance of providing a defense to a suit based on any interpretation of the accrual of a claim, a tolling agreement is a good idea for a plaintiff.
Likewise, for a defendant, the possibility of losing a defense argument based on timing may provide a valid reason to enter into a tolling agreement in an attempt to settle a claim.
Consequences of Not Having a Tolling Agreement
There are a variety of consequences for not having a tolling agreement. Keep in mind that the consequences for plaintiffs and defendants are different.
Consequences For Plaintiffs
In a case where a suit has not yet been filed, one of two outcomes may occur without a tolling agreement.
- A plaintiff may choose to file a lawsuit within the statute of limitations. This preserves the claim.
Once filed, the parties may continue with discovery, gathering more information. They are also free to discuss a possible negotiated settlement. However, sometimes depending on the facts of the case, the mere threat of filing a suit in court motivates a defendant to settle. By filing the claim, this bargaining chip is lost.
- Alternatively, without a tolling agreement, it is possible a plaintiff will not have enough factual evidence to proceed, and any legal claim will be lost because the statute of limitations or the statute of repose has passed.
Consequences For Defendants
On one hand, without a tolling agreement, personal, private, and potentially damaging information may be included in a lawsuit filed by the plaintiff to preserve a claim. On the other hand, without a tolling agreement, it is possible no claim will be filed, and the potential defendant escapes any liability.
Consider, for example, a woman has a valid claim against a defendant. She has details of a sexual relationship with the defendant while she was underage. Consider further, the defendant was married at the time and is running for Congress. The defendant benefits from a tolling agreement as the attorneys work to settle the case. The case will undoubtedly include a confidentiality agreement.
Thus, any whisper of inappropriate conduct is silenced without a record of any allegations, and any details which would necessarily be included in a suit filed with the court.
On the other hand, the defendant may doubt the woman has evidence of such an affair. He may be confident there is no evidence, as the conduct he is accused of never happened. He could refuse to sign a tolling agreement or engage in settlement discussions. Without enough facts to state a claim, no suit can be filed.
Thus, the defendant retains his privacy and does not pay to resolve an unfounded claim.
In cases where co-defendants might use a tolling agreement, a failure to have such an agreement may result in filing counterclaims which aren’t very productive. It is important to remember tolling agreements don’t prohibit filing counterclaims later.
Rather, it just delays the decision to counterclaim while the parties evaluate the situation at hand, based on the evidence the plaintiff may have.
Recap of Consequences For Parties Who Don’t Use a Tolling Agreement
|Must file suit in court, or||Risks being publicly accused in suit filed in a court of law, or||Must file counterclaim, which may weaken the argument the plaintiff has no claim.|
|Loses claim.||Escapes liability altogether.|
Except in cases where a defendant will prevail outright, due to the plaintiff lacking a sufficient basis to file a claim, there is little downside to a tolling agreement if facing a time limitation.
In numerous circumstances, even in cases where the plaintiff doesn’t currently have a sufficient basis for a claim, an agreement to additional time won’t change the basis of the claim.
Most Common Uses
The most common situations for a tolling agreement involve two different situations.
- The first is when the statute of limitations or the statute of repose is approaching.
- The second involves co-defendants.
When Deadlines are Approaching
If either side desires more time to gather evidence, a tolling agreement may be used. Similarly, if the parties believe they are close to an agreement for a negotiated settlement, and don’t want to file a suit, a tolling agreement is useful. Finally, in cases where the parties disagree about the date and time the statute of limitations began, a tolling agreement can be an effective way to protect all parties from an adverse ruling.
Co-Defendant Tolling Agreements
Tolling agreements among co-defendants are less common, but still occur with some regularity. In some states, co-defendants are required to file counterclaims while the case is pending and prior to trial. For strategic reasons, co-defendants may opt for a tolling agreement to provide them with additional time to assess the strength of a plaintiff’s claims.
As a general rule, tolling agreements are not public. They are, however, contracts, therefore, more detail about the agreement, rather than less, is typically considered better.
Tolling Agreement Sample
Here’s what a typical tolling agreement looks like:
|State of ______________|
This Tolling Agreement (the “Agreement”) is made as of this ______ day of _______________, 20______, (the “Effective Date”) by and between:
Claimant: ________________________ located at ________________________________________ (“Claimant”) and
Respondent: ________________________, located at ________________________________________ (“Respondent”).
WHEREAS, __________________________________________________________________________ _______________________________________________________________________________________________________________________________________________ [Reason(s) for this agreement]
NOW THEREFORE, the parties agree and covenant to be bound by the terms set forth in this Agreement as follows:
- Tolling Period. Any statutes of limitation, statutes of dispose, or other defenses Respondent may have with respect to any claim by the Claimant, that is not otherwise barred as of the Effective Date, shall be tolled until (Check one) ☐ ____________________, 20______ ☐ Other: ___________________ __________________________________________________________________ (the “Tolling Date”).
- No Litigation. Between the Effective Date and the Tolling Date, the parties agree not to initiate any litigation or other legal proceeding against the other party with regards to the claim described above.
- No Admission of Liability. Nothing in this Agreement shall constitute admission by either party of any claim or cause of action, any fact, conclusion or liability, or the applicability or running of any statute of limitation, statute of repose, or any other time-based defense.
- Preservation of Rights. Except as otherwise expressly provided herein, each party reserves all rights, defenses and claims it may have against the other party.
- Termination. This Agreement will terminate on the Tolling Date. Either party may terminate this Agreement at an earlier date by delivering __________ days written notice to the other party.
- Governing Law. The terms of this Agreement shall be governed exclusively by the laws of the State of _________________, without regard to its conflicts of law provisions.
- Entire Agreement.This Agreement constitutes the entire agreement between the parties and supersedes all prior understandings of the parties.
- Amendments. This Agreement may not be modified or amended except by a written agreement signed by all of the parties.
- Notices. Any notice or other communication given or made to either party under this Agreement shall be in writing and delivered by hand, sent by overnight courier service or sent by certified or registered mail, return receipt requested, to the address stated above or to another address as that party may subsequently designate by notice and shall be deemed given on the date of delivery.
- Waiver.Neither party shall be deemed to have waived any provision of this Agreement or the exercise of any rights held under this Agreement unless such waiver is made expressly and in writing. Waiver by either party of a breach or violation of any provision of this Agreement shall not constitute a waiver of any subsequent or other breach or violation.
- Disputes. Any dispute arising from this Agreement shall be resolved through: (Check one)
☐ Court litigation. Disputes shall be resolved in the courts of the State of _________________.
(Check if applicable)
☐ If either party brings legal action to enforce its rights under this Agreement, the prevailing party will be entitled to recover from the other party its expenses (including reasonable attorneys’ fees and costs) incurred in connection with the action and any appeal.
☐ Binding arbitration. Binding arbitration shall be conducted in accordance with the rules of the American Arbitration Association.
☐ Mediation, then binding arbitration. If the dispute cannot be resolved through mediation, then the dispute will be resolved through binding arbitration conducted in accordance with the rules of the American Arbitration Association.
- 14. If any provision of this Agreement is held to be invalid, illegal or unenforceable in whole or in part, the remaining provisions shall not be affected and shall continue to be valid, legal and enforceable as though the invalid, illegal or unenforceable parts had not been included in this Agreement.
- 15.Successors and Assigns. This Agreement shall be binding and inure to the benefit of the parties and their respective legal representatives, heirs, administrators, executors, successors and permitted assigns.
- 16.This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together, shall constitute one and the same document.
- 17. Miscellaneous. _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first written above.
|Claimant’s Signature||Claimant’s Full Name|
|Respondent’s Signature||Respondent’s Full Name|
You can download a template above or use our document builder to make the writing process simpler.
Frequently Asked Questions
Q: What is the “statute of limitations”?
A. The statute of limitations defines the amount of time one has to file suit. The time begins when a given cause of action “accrues.” Depending on the type of legal action at issue, a cause of action accrues at the time it occurs, or at the time one knew or should have known there was a legal cause of action.
Q: What is the “statute of repose”?
A. The statute of repose is a “drop dead date,” after which, any cause of action is barred. This applies regardless of the discovery, or lack thereof of the injury, or other legal basis for a claim.
Q: Why do these limitations exist?
A. Both the statute of limitations and the statute of repose impose limits on the length of time allowed to pass between an incident and the filing of a lawsuit. Public policy reasons behind the statute of limitations and the statute of repose are the same. By imposing a deadline, they:
- Preclude the pursuit of claims that are stale (and thus, difficult, if not impossible to defend);
- Discourage delay; and
- Promote the fair administration of justice.
Q. Can you give an illustration as to how these statutes work?
A: Imagine the statute of limitations for medical malpractice is two years, and the statute of repose for medical malpractice in the same state is seven years. A doctor commits medical malpractice on December 1, 2010. If one knows or should have known about the malpractice the day after the surgery, the statute of limitations requires filing a suit by December 2, 2012.
Now, imagine discovery of the malpractice doesn’t occur until December 2, 2014. Once the malpractice is discovered (four years after the action at issue), the statute of limitations still allows two years to file a suit. The statute of repose, however, is seven years.
Consequently, if discovery of the malpractice occurs on December 15, 2017, the statute of repose prevents a suit. This is because more than seven years has passed. This is true even though the parties did not know about the malpractice and therefore could not have filed suit before.
The statute of limitations and the statute of repose sometimes collide. For example, in our hypothetical, the medical malpractice could be discovered on December 1, 2016. While the statute of limitations provides for two years to file suit, the statute of repose requires filing within one year, by November 30, 2017, in order to preserve the claim.
Q. My attorney says I have no cause of action. Can’t she file a tolling agreement to investigate further?
A. A tolling agreement buys some time when the parties legitimately believe there may be a basis for a claim. However, if your attorney believes there is no basis for a cause of action, it would be improper to propose a tolling agreement to extend the time for filing.
Q. Are tolling agreements public record?
A. Typically, tolling agreements are contracts and not subject to public record. However, there are situations where a tolling agreement may become public record, such as when there is mass tort litigation.