Limitation

The term Limitation in law – Definition and classification

Limitation is a legal term derived from the Latin ‘limitare’ (to limit, to restrict). In the legal context, it generally refers to a fixed boundary, restriction, or limitation within a certain area of a legal relationship. Limitations appear in numerous German and international fields of law and can take various forms, which are detailed below.

Limitation in the law of obligations

Limitation of performance

In the law of obligations, a limitation primarily refers to a restriction on the performance to be rendered. The contracting parties can specify in a contract both the nature and scope of the obligation as well as its maximum amount – for example, a cap on damages.

Examples:

• Limitation of liability clauses, in which the liability of a contracting party is limited to a specified maximum amount.
• Fixed price agreements, which ensure that the payment obligation does not exceed a certain amount.

Statutory limitations

Statutory limitations can result from mandatory legal provisions, such as § 309 nos. 7 and 8 of the German Civil Code (BGB) (invalidity of certain liability limitations in general terms and conditions), which regulate limitation in cases of damage.

Limitation in liability law

Limits of the obligation to pay damages

In liability law, limitation serves to restrict the extent of damages for which a person or company is liable. Limitations occur in particular in contractual liability caps, but also in statutory maximum limits in special legal provisions.

Practical examples:

• Transport law: Limitation of the carrier’s liability by the German Commercial Code (HGB), especially in § 431 HGB.
• Construction contract law: Limitation of damages for delayed remedy of defects.

Permissibility and limits

Limitations in liability law are regularly subject to substantive judicial review. For example, exclusions of liability for intent and gross negligence (§ 309 no. 7 BGB) are not permitted.

Limitation in company law

Limits of liability for corporate entities

In company law, limitation becomes particularly apparent in the liability structure of corporations. The company’s liability is fundamentally limited to its assets. As a rule, shareholders are not liable with their private assets, except in special cases.

Examples:

• Limited liability company (GmbH): Liability limited to the company’s assets (§ 13 para. 2 GmbHG).
• Stock corporation (AG): Shareholder liability limited to their respective contributions (§ 1 para. 2 AktG).

Limitation in tax law

Boundaries and stipulations

In tax law, limitation describes a governmental restriction, such as through tax exemptions, maximum limits, or temporal restrictions. Limitations are used to restrict tax burdens or to regulate tax benefits over time.

Examples:

• Annual maximum amounts for special expenses (§§ 10, 10b EStG).
• Depreciation limits or investment deduction amounts.

Limitation in international law and contract law

International regulatory mechanisms

In international law, limitations are often regulated in bilateral or multilateral treaties; they serve to restrict rights and obligations or liability claims between the contracting states.

Typical cases:

• International liability in air transport (Montreal Convention, Art. 21): Setting maximum liability amounts for airlines in cases of baggage loss or personal injury.

Contractual limitations

Contractual limitations are used to restrict rights (e.g., usage rights, license rights) or obligations precisely. They must be clearly, specifically and understandably formulated, otherwise they risk being invalid in case of dispute.

Limitation in civil procedure law

Restriction of legal claims

In civil procedure law, a limitation can occur, for example, when claim amounts are capped in lawsuits or when, in court settlements, a final restriction of the obligation to perform is agreed.

Limitation in case law

Courts regularly review the permissibility and effectiveness of limitations, especially in the area of general terms and conditions (AGB). The standard here is the provisions of §§ 307 et seq. BGB as well as the transparency requirement. An unreasonable disadvantage to the contractual partner through limitations may result in invalidity.

Limitation in public law

Administrative acts and notices

Limitations can also occur in public law, such as through maximum funding amounts, upper limits in administrative actions, or limited validity of administrative regulations.

Examples:

• Funding notices from public bodies with maximum amounts.
• Licensing with quantitative caps.

Distinction from similar terms

Limitation, time period, and statute of limitations

Limitation is to be distinguished from time period and statute of limitations, which describe temporal restrictions of legal claims and obligations. While limitation refers to material or quantitative limits, time periods and statutes of limitation mark time-based limitations.

Literature and references

1. German Civil Code (BGB)
2. German Commercial Code (HGB)
3. German Stock Corporation Act (AktG)
4. German Limited Liability Companies Act (GmbHG)
5. German Income Tax Act (EStG)
6. Montreal Convention
7. Palandt, BGB Commentary, current edition
8. Munich Commentary on the BGB, current edition

Conclusion

Limitations are a central instrument in German and international law for the regulation, restriction, and structuring of legal relationships. They are widely used in a variety of legal areas and must always be considered in light of applicable statutory limits and relevant case law. Compliance with the permissibility and drafting of limitations is crucial for the effectiveness of respective clauses and provisions.

Frequently asked questions

What role does limitation play in enforcing claims under civil law?

In civil law, limitation, often also referred to as the statute of limitations, regulates the time frame within which a party can assert its claims judicially or extrajudicially. If the limitation period, i.e., the legally prescribed time limit, has expired, the claim does not automatically cease to exist, but enforcement can be refused if the debtor raises the defense of limitation. For many civil claims, such as those arising from contract or tort, limitation periods begin to run from knowledge or grossly negligent ignorance of the damage and the injuring party. Proper determination and monitoring of these periods is essential for creditors, as after expiration of the limitation period, a claim is usually no longer successfully enforceable. Furthermore, limitation also plays a role in settlement negotiations or judicial dunning procedures, as an impending expiration of the period creates a need for action.

Are there ways to interrupt or suspend an ongoing limitation?

The law provides various means to suspend or interrupt an ongoing limitation period. Suspension of limitation means the running of time is halted for a certain period, for example, through negotiations between creditor and debtor, the filing of a lawsuit, or the initiation of a dunning procedure. There are also statutory reasons, such as force majeure or lis pendens, which can result in suspension. Interruption of limitation, referred to in some jurisdictions as recommencement, means that after the occurrence of a certain event (e.g., the debtor’s acknowledgment or assertion of the claim in court), the limitation period restarts from the beginning. Differences in concept and legal effect between suspension and interruption must be carefully observed, as they are crucial for the pursuit of claims.

What special limitations apply to labor law claims?

In employment law, there are sometimes different or specialized limitations compared to general civil law. Employment contracts or collective agreements often contain so-called exclusion periods or forfeiture periods, which are much shorter than statutory limitation periods and may exclude claims after only a few months. These deadlines provide that wage or vacation claims must be asserted in writing within a certain period after becoming due. If this period lapses, the claim is forfeited regardless of the general statutory limitation period. When asserting employment law claims in court, it is essential to review whether such contractual or collectively agreed special rules exist, as they may take precedence over statutory limitations.

How do contractual agreements affect statutory limitations?

In principle, under German law, the parties to a contract may agree to shorten or extend the limitation period, subject to mandatory statutory limits. Certain minimum durations for limitations are protected by law to prevent one party from being unreasonably disadvantaged by excessively short periods, such as in consumer sales or construction contracts. Conversely, in business-to-business transactions, longer limitation periods may also be agreed upon, provided that no statutory maximum limits are exceeded or mandatory protective provisions are violated. Individual contractual arrangements should always be carefully reviewed for their validity, as impermissible limitations are deemed invalid in case of doubt, and statutory regulation takes their place.

Are there differences in limitation for public law and private law claims?

The limitation of public law claims sometimes follows separate rules that can differ significantly from civil law limitations. For example, many public law provisions have specific limitation or exclusion periods that must be observed when asserting tax claims, fee demands, or administrative acts. The time limits for challenging administrative acts or filing legal remedies are usually explicitly set out by law and often differ in duration and calculation from civil law limitations. In administrative procedural law, certain deadlines apply that may be triggered by administrative notices or special service of documents. Therefore, with public law claims, it is always necessary to closely examine the relevant special laws.

How is it determined in individual cases whether a limitation period has already expired?

Determining whether a limitation period has already expired in an individual case requires careful legal analysis. Several steps are necessary: First, the applicable law and corresponding limitation period must be identified for the underlying claim. Next, it must be established when the limitation period began, which often depends on the creditor’s knowledge of the damage and the identity of the debtor—special rules may apply to continuing obligations. Then, it should be examined whether legal actions such as filing suit, initiating a dunning procedure, negotiations, or acknowledgments have suspended or interrupted the limitation period. Finally, calculation of when the limitation period actually expires is required. Because miscalculating the limitation period can result in the claim becoming permanently unenforceable, particular care is necessary—in case of dispute, it is generally the court that decides upon the plea and the actual expiration of the period.

What are the most common sources of error in dealing with limitation periods from a legal perspective?

Errors in observing limitations often arise from incorrect calculation of periods, insufficient awareness of special contractual provisions, mistakes about the commencement of the period and obtaining knowledge, or failure to ensure timely interruption or suspension of a claim. Particularly risky are claims with special limitation periods in employment or tenancy law, as well as cross-border cases where foreign law applies. Reliance on mere informal negotiations without a legally effective suspension is also among the most common mistakes. Legal advice and careful documentation of the running periods and actions taken are the most important measures to comply with limitations and to avoid legal disadvantages.