Page 11 - John Hundley 2009

Sharp Thinking

No. 21 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. June 2009

Statute of Limitations for Contracts Limited

Credit Card Claims Held Subject To Five-Year Bar

By John Hundley, Jhundley@lotsharp.com, 618-242-0246

The ten-year statute of limitation for actions on written contracts
does not apply unless all the necessary terms of the contract –
including the names of the parties – are set forth in a single written
document, a panel of the Illinois Appellate Court ruled last month.

Construing that statute (735 ILCS 5/13-206) in a credit card
collection case, the First District held insufficient a complaint which had
attached to it the standard credit card agreement, the account appli-
cation, account statements from near the end of the card-using period, and an affidavit of debt. While
the court recognized that the attachments might be sufficient to support a claim on an account-stated
or unwritten-contract theory, the complaint had not been filed within the five-year period applicable to
those claims (735 ILCS 5/13-205) and hence dismissal was proper, the court said. Portfolio Acquisi-
tions, LLC v. Feltman, __ Ill.App.3d __, 2009 WL 1444791 (May 20, 2009).

While the court’s interpretation of § 13-206’s requirements is not
limited to credit card cases, it appears that unless the decision is
overturned virtually all credit card debts will be subject to the five-
year statute for “unwritten contracts, expressed or implied”.

The ten-year statute, the court said, is strictly interpreted, and a
“contract will only be deemed written if parties are identified and
all the essential terms are in writing and ascertainable from the
instrument itself.” If resort to other evidence is necessary, “the contract is considered an oral con-
tract for purposes of the statute of limitations.” Thus, complaints which merely attach the standard
account agreement applicable to all cardholders fail to meet the applicable test, because the specific
debtor is not identified therein.
Moreover, attaching the account application, monthly state-
ments, and an affidavit will not suffice, at least in the credit card
context, the court said. The account application, it said, was
insufficient because granting the application does not create a debt.
Rather, a credit card agreement is merely “a standing offer to
extend credit that may be revoked at any time”. An enforceable
contract arises only when the card is used (or charges to the
account otherwise made); thus, “each time the credit card is
used, a separate contract is formed between the cardholder and the bank.” That seems to say

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Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
Thinking shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein
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