Limitation periods – legal sanction for the passive creditor

The parties who sign preliminary agreements for purchase of real estates or other contracts under the Bulgarian legislation should be aware that, under the Bulgarian Law on Contracts and Obligations, various limitation periods apply leading accordingly to different legal consequences.

Under Art.110 of the Law on Contracts and Obligations, all rights to claim shall be extinguished upon the expiry of a five-year limitation period unless otherwise provided in the law.  This is the general limitation period which is applicable in cases where no specific law provides otherwise.

There are however some exceptions from this general rule.

The following obligations shall be extinguished upon the expiry of a three-year limitation period:

a) labour remuneration claims for which no other limitation period is specified;
b) claims for damages and liquidated damages resulting from non-performance/breach of contracts;
c) claims for rent, interest and other scheduled payments;

Any agreement for shortening or extending the established limitation periods, as well as any agreement for their renunciation before expiry are invalid.

The limitation period starts on the day the claim becomes executable.
In the event where it has been agreed that the claim would become executable following an invitation, the limitation period begins on the day when such invitation is received by the debtor.
As for claims arising from tort, the limitation period begins upon discovery of the offender.
As for claims for liquidated damages for default, the limitation period begins on the last day for which the liquidated damages are assessed.

No limitation periods apply:
a) between children and parents as long as the latter exercise parental rights;
b) between persons under guardianship or custody and their guardians or custodians as long as the guardianship or custody lasts;
c) between spouses;
d) for claims of persons whose property is placed under trusteeship by law or by order of court, against the trustee as long as the trusteeship lasts;
e)for claims for damages to legal entities against their managers as long as the latter are in office;
f)for claims of minors and persons under interdiction for the period of time when they have no legitimate representative or custodian appointed, and six months after such a person is appointed or after the legal incapacity is terminated;
g)for the duration of the judicial proceedings on the claim.

A limitation period shall be interrupted:
a) upon admission of the claim by the debtor;
b) upon bringing an action or defense, or an application for a conciliation procedure to commence; if the action or defense or application for a conciliation procedure is not upheld, the limitation shall not be deemed interrupted;
c) upon undertaking acts for forcible execution.

Should a debtor perform his obligation after the expiration of the limitation, he shall not be entitled to claim back what he has paid, even though at the time of payment he might not have known that the limitation had expired. The importance of the limitation period reflexes to the behavior of the creditor – if he is interested in collecting his money during the period, if he is active and has undertaken all possible legal actions for protection his rights, if he has claimed before the court, etc. IF NOT – then the law presumes that the creditor is not interested in protection his rights as granted by law and it is not reasonable to claim before the court after expiration of the limitation period. The limitation period is the legal sanction, the punishment for the passive creditor.

This article was created by Valova&Angelova law firm.