In Disney’s 1951 classic, “Alice in Wonderland,” the White Rabbit famously observed, “I’m late, I’m late for a very important date!” We have all experienced that frantic feeling and the accompanying sense of loss when being late results in missing a deadline. 

We are all guilty of doing so, including yours truly. In fact, the idea for this column came from missing the original deadline to submit for an earlier issue of The Wholesaler. Thankfully, the editors are very understanding and gave me another chance. 

However, being late and missing a deadline in business, where there are legal obligations that are not as easily forgiven, if at all, can have significant ramifications that cannot be reversed. As discussed below, some deadlines are created by statute or common law, while other deadlines arise from contracts and other transactional obligations. Still others are the result of not acting before the ultimate “final deadline” — death. 

Statutes of limitations

Sometimes missing a deadline is the result of running out of time or forgetfulness, while at other times a deadline is missed when someone doesn’t even know one exists. Such is often the case when failing to comply with a statute of limitations, the applicable time period in which to file a lawsuit. 

Every state has its own statute of limitations for various types of actions (legal proceedings). Sometimes they are the same, sometimes not. For instance, in Illinois (where I am located), if someone wants to bring a lawsuit for breach of contract, the owner or business will need to ensure the case is filed within 10 years after the breach occurred if the contract is in writing, or five years if it is an oral contract. 

However, if the case is subject to California’s statute of limitations, a claim for breach of a written contract is only four years and two years for oral agreements. Generally, if the applicable statutory limitation period expires, there is no do-over, and the case will not proceed — unless there is a jurisdictional basis to file the case in a different state that has a longer period. 

So, if you believe you have a basis to file a suit, don’t sit back and wait, or you may find yourself without a legal remedy.

Laches

Even if someone complies with a statutory limitation period, a court still could find that the plaintiff (the person who brings the case) waited too long. Laches is an equitable defense that allows a defendant (the person being sued) to ask the court to dismiss a case because the plaintiff waited too long to bring it. That delay caused significant and irrevocable prejudice and harm to the defendant, such as the destruction of relevant documents and the death of witnesses. 

In such instances, even if the applicable statute of limitations has not yet expired, the court may throw out the case. For instance, if someone waits nine years, 11 months to file a claim in Illinois for breach of a written contract — which is within the applicable 10-year limitation period — the court can decide that it would be appropriate to proceed. 

One court summarized that in contrast to a statute of limitations, which forecloses an action based on a simple lapse of time, laches turns on “the inequity of permitting the claim to be enforced, an inequity founded upon some change in the condition or relation of the property and parties. …The doctrine is grounded in the equitable notion that courts are reluctant to come to the aid of a party who has knowingly slept on his rights to the detriment of the opposing party.”

Contractual and transactional deadlines

Statutes and common law are not the only sources of deadlines. To a greater extent, they exist in contracts and other transactional documents. If your company buys, sells or distributes goods or services, which should include about everyone reading this, you commonly deal with numerous deadlines, both setting them or needing to comply with them, or not.

These include product warranty deadlines; deadlines to accept or reject proposals, products or orders; deadlines to exercise options; deadlines for payment; and more. Too often, these deadlines are found in boilerplate terms and conditions that are simply missed or not even read. Yet, missing a stated deadline could cost you and your company dearly. It could be the difference between being able to return nonconforming goods and being stuck with them. 

Another example is failing to terminate an “evergreen” contract in a timely manner. Evergreen contracts are self-renewing contracts that are often used with service providers. Those contracts typically provide that unless the customer or client gives timely notice of nonrenewal, it will be renewed for another two, three or more years. Those contracts are a fertile source of litigation. 

Another deadline that is often buried in the fine print is a deadline to bring claims, such as providing that a claim for breach of contract must be brought within a one-year period — even if the applicable statute of limitations has a much longer period. Courts regularly enforce such provisions.

To avoid inadvertently missing such deadlines, always carefully read the transactional documents and related terms and conditions, even those that are stated online, no matter how time-consuming and painful the process may be. If you don’t have time to do so or if you don’t understand everything, contact your attorney. 

Don’t ignore the issue and hope for the best, or you may find yourself with no warranty coverage, a contract that renewed for another six years, or no right to bring a warranty claim or seek recourse for a breach of contract.

Death, the final deadline

Since death is inevitable, everyone should strive to minimize its impact on their business and family. However, too often, people miss the final deadline by dying without an up-to-date (if any) estate plan, or by failing to have a succession plan for their business. As a result, valuable assets are lost or disposed of in a manner contrary to the now-deceased owner’s wishes. 

In the past year alone, I have had three cases in which business owners died without addressing what would happen to their business and investments following their deaths. In two of those cases, the necessary documents had already been drafted by the company’s attorney, but the owners — including the now-deceased owner — never had the time to get them done. 

Instead of having an orderly and quick procedure in place through which the deceased owner’s interest would be purchased by the company (called a redemption) or by the other owners, the decedent’s estate became the owner and was essentially holding the company and other owners hostage in order to leverage a much better deal than the deceased owner would have agreed to. 

In that case, it worked out well for the beneficiaries of the estate, but not so well for the other owners of the business. In another case, the company’s shareholders, including the now-deceased shareholder, failed to update the value of the company’s shares stated in the shareholders’ agreement, which had been written seven years earlier. As a result, the value of the company and its shares was grossly under market. 

It took a lot of time, resources and acrimonious negotiations to finally resolve the issue, and the estate received far less than it would have received had the shareholders considered the possibility of the final deadline and taken appropriate steps to update their agreement in a timely manner. 

Just as not having an up-to-date succession plan for your business can cause problems and cost money to resolve (or not), so too not having a current estate plan, or no estate plan at all, can cause havoc to your family and cost them significant assets and possibly higher taxes. That should never happen — but it does. 

In the absence of an estate plan, those assets not held in joint tenancy likely will be disposed of in accordance with your state’s laws of intestacy, which will divide your property between your legal heirs pursuant to a statutory formula — which may not be consistent with your wishes. This could result in your property being liquidated and the proceeds being paid to people you have not spoken to or thought about in years. 

And, if you are fortunate enough to have an estate of value, in the absence of an estate plan and a modicum of tax planning, your hard-earned assets may be unnecessarily diminished by taxes. This could be minimized, if not eliminated entirely, by being mindful of the final deadline and taking the time to have an estate plan prepared and signed before it is too late. At the same time, remember to execute healthcare and property powers of attorney. Don’t wait until you are sick to get it done.

Don’t let delays and missed deadlines hurt you, your family, your business and, if applicable, your fellow owners. Although it is easier said than done, you need to make time to be mindful of and compliant with the legal, statutory, contractual, transactional and existential deadlines to which you and your business are subject. 

In the end, it will take less time and expense now to avoid missing deadlines than to try to remedy a missed deadline. As wisely noted by Ben Franklin, “Don’t put off until tomorrow what you can do today.” If you fail to heed such a warning, be prepared for the resulting consequences.