California law requires a plaintiff to file a lawsuit arising from a contract within a certain period after a defendant's alleged breach of contract or other occurrence that establishes the basis of the plaintiff's lawsuit. One defense available to defendants in a contract case is to show that the statute of limitations has expired, which bars the plaintiff from filing the lawsuit. California statutes specify the statute of limitations periods for contract-related lawsuits.

Statute of Limitations

Nolo's Plain-English Law Dictionary defines a statute of limitations as the "legally prescribed time limit in which a lawsuit must be filed." Legislatures establish time limits for initiating lawsuits primarily because evidence becomes less trustworthy as time passes. California attorney Ralph Warner observes, "memories fade, witnesses die or move away, and once clear details become blurred." California and other states have a public interest in ensuring fair trials, and a statute of limitations for contract lawsuits supports that goal.

Oral Contracts

Section 339 of California's Code of Civil Procedure establishes a two-year statute of limitations for oral contracts. It requires a plaintiff to file a lawsuit within two years of the alleged breach, or similar event, of an oral contract. California courts will enforce an oral contract unless a statute requires it to be a written contract. For example, Section 7159 of California's Business & Professional Code requires home-improvement contracts between an owner and a contractor to be in writing. Proving the terms of an oral contract at trial, however, typically requires witnesses or other compelling evidence.

Written Contracts

Section 337 of California's Code of Civil Procedure establishes a four-year statute of limitations for most written contracts. It requires a plaintiff to file a lawsuit within four years of the alleged breach, or similar event, of a written contract. This section, however, specifies that a two-year statute of limitations applies to certain written contracts involving real-estate titles and title insurance.

Tolling

Even if the California statute of limitations appears to have expired, certain circumstances suspend, or toll, it for a period. If one of the parties has been in prison, Section 352.1 California's Code of Civil Procedure suspends the statute of limitations up to two years. California law also suspends the statute of limitations if a party leaves the state or is a minor. Courts will also suspend the statute of limitations in rare circumstances if suspension is required to ensure justice in the case.

Contracts Stipulating a Statute of Limitations

California courts allow contracting parties to include a term in the contract that shortens the state's statutory statute of limitations period. California attorneys Allyssa J. Holcomb and Henry R. Stiepel assert, "any provision shortening a statute of limitations ... is valid if it is reasonable---i.e., the shortened period still provides sufficient time to effectively pursue a judicial remedy."