Ever heard of the continuing contract doctrine? It’s the sister of the continuing tort doctrine. Both operate as an exception to the statute of limitations that allows a claimant to recover for contract breaches that occur after the accrual date.
But can the continuing contract doctrine apply to contracts other than an installment contract?
In the case, Paymentech dangled a zero reserve for processing and monthly funds earned from credit card sales to entice Spin Doctor to contractually hire it to process Spin Doctor’s credit card needs. Later, Paymentech imposed a $7,000 reserve and stopped depositing credits in Spin Doctor’s account. After Spin Doctor’s sales increased substantially, Paymentech imposed a daunting $940,000 reserve. The reserve prevented Spin Doctor from maketing its products, and thus, its sales went south. As you can imagine, Spin Doctor sued Paymentech for breach of contract.
Paymentech successfully moved for summary judgment on the 4 year statute of limitations because Spin Doctor discovered the $7,000 reserve back on April 13, 2001, but didn’t sue until April, 20, 2005. Spin Doctor appealed claiming the continuing contract doctrine preserved its breach of contract claim.
Should the continuing contract doctrine apply?
Yes. Paymentech had contracted to pay Spin Doctor monthly payments for its credit card sales. Even though Paymentech allegedly breached the contract on April 13, Spin Doctor continued to perform. As a result, the court decided to treat the contract as continuing in effect so that if Paymentech failed to make the monthly payments as it agreed after April 13, each failure constituted a new breach. Thus, all breaches going back four years from April 20, 2005 were actionable.
Here is the opinion.