A tolling agreement template comes in handy when two parties mutually agree to suspend or toll the time-based statute of limitations. This document is also known as a standstill agreement.
Table of Contents
What is a tolling agreement?
A tolling agreement is between the claimant and the respondent when they agree to toll or suspend the rights, rules, or claims governing legal actions. The statute of limitations and the statute of repose are the common rights, laws, and claims that both parties may mutually suspend.
When do you need a tolling agreement?
Parties usually need a tolling agreement when they require extra time to evaluate the validity and legitimacy of claims and damages. Here are some other common reasons;
Ensuring clarity regarding the statute of limitations or statute of repose
A law that is given when one can bring a claim after an alleged offense is referred to as the statute of limitations. This may include collecting a debt, pursuing a contract dispute, etc. Moreover, the timeframes of the statute of limitations vary from state to state.
The statute of limitations usually starts when the person knows they had a legal claim. The parties don’t have a dispute regarding the appropriate “end date” of specific claims and rights when they enter into a tolling agreement. Also, they don’t have the threat of an unfavorable ruling by the court.
Ensuring clarity regarding the final date a suit may be filed
There are several facts in a tolling agreement that surround the date the suit may be filed. This agreement includes an end date along with suspending the statute of limitations and the statute of repose. In the agreement, the parties mutually agree that no suit will be filed after a particular date or when a specific condition is met.
Strategic advantages for plaintiffs
Without filing a suit in court, causes of action are often settled between parties. A defendant’s reputation or business can get incredibly damaged due to the contents of certain lawsuits. When the defendant affixes their signature on the tolling agreement, they can pursue a settlement off the record. In order to preserve the claim, a plaintiff may have to file a suit.
In addition, when dealing with counterclaims, co-defendants may also use this agreement. The defendants have to determine the strength of a plaintiff’s case before pursuing a counterclaim against a co-defendant. Doing so is important to identify whether the plaintiff can establish any liability.
Avoid litigation costs
Litigation costs can add up from hiring litigation lawyers to filing counterclaims. You can avoid these expenses from building up if you have a tolling agreement. This is because the agreement encourages both parties to settle the dispute formally. Without incurring the costs of initiating litigation, both parties can get the benefits of litigation. However, the dispute could be handled through arbitration if negotiations fail.
Get more time to think
The parties get more time to think about resolving the dispute as the agreement specifies how long both parties want to suspend the statute of limitations. Both the defendant and the plaintiff have more time to build a defense and to consider the strengths and weaknesses of the claim.
Elements to include in a tolling agreement:
Important elements to include in a tolling agreement are;
- Party details
- Start date; when the agreement is effective
- End date; when the agreement expires
- Tolling period
- Intent not to sue
- Declaration of no liability
- Neutrality statement
- Wavier of time-based defenses
- Extension agreement date
- Signatures of parties
What happens if you don’t have a tolling agreement?
Both plaintiffs and defendants have to face different consequences for not having a tolling agreement;
Consequences for plaintiffs
Without a tolling agreement, one of two outcomes may occur in case a suit has not yet been filed;
- Within the statute of limitations, a plaintiff may choose to file a lawsuit that preserves the claim.
- A plaintiff will not have enough factual evidence to proceed without a tolling agreement. Since the statute of limitations or the statute of repose has passed so it is possible any legal claim will be lost.
Consequences for defendants
If you don’t have a tolling agreement, the plaintiff while filing a lawsuit includes personal, private, and potentially damaging information to preserve a claim. It is also possible without the agreement that the potential defendant will escape any liability and no claim will be filed.
When to use a tolling agreement?
You should consider using a tolling agreement in the following critical situations;
Deadlines are coming
If either of the parties needs more time to gather evidence then they may use a tolling agreement. Similarly, this agreement is very useful in case the parties don’t want to file a suit and think that they are close to an agreement for a negotiated settlement.
Additionally, a tolling agreement can protect all parties from an adverse ruling effectively if the parties don’t agree on the date and time the statute of limitations began.
Co-defendant tolling agreements
A tolling agreement is less common among co-defendants. Before trial, co-defendants have to file counterclaims while the case is pending. They may use a tolling agreement for strategic reasons such as to give extra time to evaluate the strength of a plaintiff’s claims.
FAQS (Frequently Asked Questions)
The period of time when a person has to file a legal action is known as the statute of limitations. The clock begins ticking when a specific cause of action “accrues.” A cause of action accrues at the time of the event in some cases of legal action.
The statute of repose refers to a drop-dead date after which you can’t file any cause of action.
The tolling agreement isn’t subject to public record. However, this agreement becomes a public record in some cases like where there is mass tort litigation.
The mutually agreed tolling agreement can last for an indefinite period. They are typically valid for 90 days or 3 months.
By preparing a tolling agreement, both the claimant and the respondent can get benefits. They get additional time to negotiate the settlement or to prepare for trial when they toll the statute of limitations.
Grace Harry is an experienced freelance writer with an experience for 12+ years. She got her Master’s in Financial Management degree from the University of Dennison in 2007. She worked at California State Bank to help clients with their credit, investments, and bank accounts. She likes to assist people in reaching their financial goals when it comes to financial planning.
