Nebraska Uniform Commercial Code 2-725

UCC 2-725

2-725.

Statute of limitations in contracts for sale.

(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.

(3) Where an action commenced within the time limited by subsection (1) is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within six months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.

(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which accrued before the Uniform Commercial Code became effective.

Source

  • Laws 1963, c. 544, Art. II, § 2-725, p. 1767;
  • Laws 1992, LB 861, § 14.

Annotations

  • 1. Future performance exception

  • 2. Section not applicable

  • 3. Miscellaneous

  • 1. Future performance exception

  • Pursuant to subsection (2) of this section, in order to constitute a future performance warranty, the terms of the warranty must unambiguously indicate that the manufacturer is warranting the future performance of the good for a specified period of time. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • Pursuant to subsection (2) of this section, the determination of a discovery date is essentially an inquiry into all of the facts and circumstances facing the buyer; thus, a court should examine all relevant evidence that bears on the buyer's discovery. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • Pursuant to subsection (2) of this section, the mere existence of "repair or replace" language in a warranty will not disturb a finding that the warranty extends to future performance. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • Pursuant to subsection (2) of this section, when a warranty extends to future performance, the statute of limitations is tolled and the cause of action does not begin to accrue until the breach of that warranty is or should have been discovered. The discovery analysis should focus on the buyer's knowledge of the nature and extent of the problem(s) with the goods. It is only when a buyer discovers, or should have discovered, facts sufficient to doubt the overall quality of the goods that subsection (2) is satisfied and the statute of limitations begins to run. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • The future performance exception contained in subsection (2) of this section applies only to an express warranty and not to an implied warranty. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • In order to meet the exception in subsection (2) of this section based on a warranty of future performance, the warranty must be an express rather than an implied warranty and the warranty must explicitly extend to future performance. A warranty to repair or replace, without more, is not an explicit warranty of future performance and will not extend the commencement of the 4-year statute of limitations set forth in subsection (1) of this section. Nebraska Popcorn, Inc. v. Wing, 258 Neb. 60, 602 N.W.2d 18 (1999).

  • The future performance exception of this section applies only to express warranties and does not apply to implied warranties. Murphy v. Spelts-Schultz Lumber Co., 240 Neb. 275, 481 N.W.2d 422 (1992).

  • An action for breach of warranty in the sale of goods must be commenced within four years of tender of delivery. The failure to discover the breach prevents the running of the statute only when the warranty explicitly extends to future performance, and an implied warranty cannot explicitly extend to future performance. Allan v. Massey-Ferguson, Inc., 221 Neb. 528, 378 N.W.2d 664 (1985).

  • When an express warranty is created by operation of section 2-313(1)(b) so that certain contemplations of the parties are contained in the representation such that those representations constitute a part of the description of the goods and therefor become a part of the basis of the bargain and an express warranty is created thereby, such express warranty will necessarily extend to future performance if the representations relate to such, and discovery of a breach relating thereto must await the time of such performance; in such a situation, the cause will accrue when the breach is or should have been discovered, and not upon tender of delivery. Moore v. Puget Sound Plywood, 214 Neb. 14, 332 N.W.2d 212 (1983).

  • An action for breach of warranty in the sale of goods must be commenced within four years of tender of delivery. Failure to discover the breach prevents the running of the statute only when the warranty explicitly extends to future performance. Grand Island School Dist. No. 2 v. Celotex Corp, 203 Neb. 559, 279 N.W.2d 603 (1979).

  • 2. Section not applicable

  • The period of limitations contained in this section does not apply to sales indemnity actions. Hillcrest Country Club v. N.D. Judds Co., 236 Neb. 233, 461 N.W.2d 55 (1990).

  • This section does not apply where a party is seeking indemnification. City of Wood River v. Geer-Melkus Constr. Co., 233 Neb. 179, 444 N.W.2d 305 (1989).

  • 3. Miscellaneous

  • Subsection (1) of this section prohibits the parties, at least by original agreement, from extending the statute of limitations. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • The limitations period was designed to be relatively short to serve as a point of finality for businesses after which they could destroy records without the fear of subsequent suits. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • The statute of limitations accrues upon tender, unless the warranty extends to future performance. There is no exception for new warranties extended postsale, and the creation of such an exception is not a matter for this court. Controlled Environ. Constr. v. Key Indus. Refrig., 266 Neb. 927, 670 N.W.2d 771 (2003).

  • When a party brings a suit which is characterized as a suit in tort alleging negligence in the performance of a contract, the applicable statute of limitations is that which is applied to actions in tort. Thomas v. Countryside of Hastings, 246 Neb. 907, 524 N.W.2d 311 (1994).

  • A breach of warranty alleging only economic loss is governed solely by the U.C.C. statute of limitations found in this section. Gillette Dairy, Inc. v. Mallard Mfg. Corp., 707 F.2d 351 (8th Cir. 1983).

  • COMMENT

  • Prior Uniform Statutory Provision: None.

  • Purposes:

  • To introduce a uniform statute of limitations for sales contracts, thus eliminating the jurisdictional variations and providing needed relief for concerns doing business on a nationwide scale whose contracts have heretofore been governed by several different periods of limitation depending upon the state in which the transaction occurred. This article takes sales contracts out of the general laws limiting the time for commencing contractual actions and selects a four-year period as the most appropriate to modern business practice. This is within the normal commercial record-keeping period.

  • Subsection (1) permits the parties to reduce the period of limitation. The minimum period is set at one year. The parties may not, however, extend the statutory period.

  • Subsection (2), providing that the cause of action accrues when the breach occurs, states an exception where the warranty extends to future performance.

  • Subsection (3) states the saving provision included in many state statutes and permits an additional short period for bringing new actions, where suits begun within the four-year period have been terminated so as to leave a remedy still available for the same breach.

  • Subsection (4) makes it clear that this article does not purport to alter or modify in any respect the law on tolling of the statute of limitations as it now prevails in the various jurisdictions.

  • Definitional Cross References:

  • "Action". Section 1-201.

  • "Aggrieved party". Section 1-201.

  • "Agreement". Section 1-201.

  • "Contract for sale". Section 2-106.

  • "Goods". Section 2-105.

  • "Party". Section 1-201.

  • "Remedy". Section 1-201.

  • "Term". Section 1-201.

  • "Termination". Section 2-106.