In a recent Rhode Island Supreme Court decision, OSJ of Providence, LLC v. Aly T. Diene, No. 2016-14-A, the court determined that the expiration of a guaranty in a contract did not operate to shorten the applicable statute of limitations to recover for breach of that guaranty. The defendant was the corporate officer of a restaurant that entered into a five-year lease agreement with the plaintiff. As part of the lease, the defendant executed a personal guaranty that expired on the last day of the twelfth full month following the initial commencement of rent obligations.

In a recent Rhode Island Supreme Court decision, OSJ of Providence, LLC v. Aly T. Diene, No. 2016-14-A, the court determined that the expiration of a guaranty in a contract did not operate to shorten the applicable statute of limitations to recover for breach of that guaranty. The defendant was the corporate officer of a restaurant that entered into a five-year lease agreement with the plaintiff. As part of the lease, the defendant executed a personal guaranty that expired on the last day of the twelfth full month following the initial commencement of rent obligations.

The restaurant thereafter defaulted on the rent payments within the specified twelve month period. The plaintiff demanded payment from defendant pursuant to the personal guaranty. After not receiving full payment pursuant to the demand, the plaintiff filed suit against the defendant. The trial court entered judgment against defendant pursuant to the personal guaranty.

On appeal before the Supreme Court, the defendant asserted that the statute of limitations barred the plaintiff’s action because the suit was filed after the twelve-month guaranty period had expired. The Court disagreed with defendant’s assertion. Rather, the Court appropriately noted that the guaranty obligated defendant to guarantee all payments within that twelve month period, not that plaintiff only had until the expiration of the twelve-month period to sue. The Court noted that the applicable statute of limitations was ten years from when the contract breach occurred.

While not a novel concept, it does serve to reinforce an important concept, particularly for individuals that may have breached a contract in the past but have not yet been sued. You are never truly “in the clear” until the statute of limitations has passed. For more information on this issue or other legal matters, contact Attorney Patrick J. McBurney at 401-824-5100 or email [email protected]. We welcome your comments, questions and suggestions.