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Tolling Agreement

Free Tolling Agreement Template

Utilize our Tolling Agreement to mutually suspend certain rights, regulations, or claims while navigating a legal dispute with another party.

Employ a tolling agreement, alternatively referred to as a standstill agreement, to "toll" or temporarily halt the progression of a time-based statute that may apply to a claim. This agreement's purpose, suitable situations for its use, and access to a tolling agreement template are provided below.

Table of Contents

What is the meaning of Tolling Agreement?

A Tolling Agreement, often known as a standstill agreement, is a formal arrangement between two or more parties involved in a current or potential lawsuit. In this agreement, the parties decide to "toll" or temporarily suspend specific rights, rules, or claims that typically govern legal actions. These rights, rules, and claims often include the statute of limitations and the statute of repose.

The Tolling Agreement serves the following purposes:

  1. Tolling Time Restraints: It suspends the time limits, such as the statute of limitations and the statute of repose, that typically regulate legal actions.
  1. Mutual Understanding: It establishes a mutual agreement between the parties, where they voluntarily relinquish their right to use the statute of limitations or the statute of repose as a defense against a lawsuit or crossclaim if pursued at a later time.

It's important to note that entering into a tolling agreement doesn't imply guilt, responsibility, or liability. It also doesn't waive a valid claim related to the statute of limitations or the statute of repose before the agreement takes effect. The sole right affected by a tolling agreement is the party's ability to argue that too much time has passed during the tolling period for a lawsuit to proceed.

Why Propose a Tolling Agreement?

Tolling agreements offer several advantages that make them a valuable consideration in various situations. Here are some common reasons for proposing a tolling agreement:

  1. Assessment Time: Allows parties extra time to thoroughly evaluate the validity and extent of claims and damages without the pressure of meeting legal deadlines.
  1. Statute of Limitations Certainty: Provides clarity regarding the statute of limitations or statute of repose, ensuring parties know when legal actions must be initiated.
  1. Strategic Benefits for Plaintiffs: Can strategically benefit plaintiffs by providing additional time to build a strong case.
  1. Strategic Benefits for Defendants: Offers defendants strategic advantages, such as time to prepare a robust defense.
  1. Facilitates Settlement: Encourages both parties to explore settlement options, potentially resolving the dispute amicably.
  1. Cost Savings: Avoids the expenses associated with litigation, including legal fees and court costs.
  1. Extended Deliberation: Allows parties more time for thoughtful consideration and decision-making.

Establishing Clarity in Statute of Limitations or Statute of Repose

The statute of limitations dictates when a claim can be filed following an alleged offense, encompassing various legal actions like debt collection, medical malpractice lawsuits, and contract disputes. These timeframes can vary significantly by state, leading to ambiguity for many involved in litigation regarding when the statute of limitations starts.

Typically, the statute of limitations commences when an individual becomes aware or should have become aware of their legal claim. Consider a scenario involving a foreign object inadvertently left inside a patient during a medical procedure. Does the statute of limitations begin when the patient first experiences pain from the object, when an infection develops, when they should have consulted a doctor, or when they actually visited a doctor?

Through a tolling agreement, parties eliminate disputes over the precise "end date" of specific claims and rights, sidestepping the risk of an unfavorable court ruling. Instead, they can concentrate on assessing the merits (or lack thereof) of a potential lawsuit and collaborate toward a potential resolution.

Importantly, tolling agreements do not waive valid arguments concerning a statute of limitations or repose that has already expired; they pertain solely to those within the tolling period.

Providing Clarity on the Final Filing Date for a Lawsuit

A tolling agreement serves as a comprehensive document that not only suspends the statute of limitations and the statute of repose but also defines a crucial "end date." This agreement entails both parties mutually waiving the statute of limitations and statute of repose, specifying that no lawsuit will be initiated beyond a predetermined date or condition.

This waiver serves multiple purposes:

Benefitting Plaintiffs Strategically

Plaintiffs gain an advantage by extending their timeline to investigate and accumulate evidence supporting their claims. Without a tolling agreement and sufficient factual support for a valid claim before the statute of limitations expires, a plaintiff risks losing the opportunity to file a lawsuit.

Strategic Advantages for Defendants

Defendants often prefer to settle disputes privately, avoiding public court filings that can harm their reputation or business. By endorsing a tolling agreement, defendants can pursue confidential settlements without initiating legal action. In some cases, plaintiffs may need to file a lawsuit to safeguard their claim without a tolling agreement.

Co-defendant Considerations

Co-defendants may employ tolling agreements, particularly when addressing counterclaims like cross-claims and third-party claims. Before pursuing a counterclaim against a co-defendant, parties may wish to assess the plaintiff's case's strength and potential liability.

Promoting Settlement and Cost Reduction

Tolling agreements introduce a negotiation deadline before formal legal proceedings can be initiated, encouraging both parties to explore out-of-court settlements. These agreements help circumvent the escalating expenses associated with litigation, from hiring litigation attorneys to filing counterclaims. In some cases, disputes may be resolved through arbitration, offering a cost-effective alternative to court proceedings.

Facilitating Thoughtful Deliberation

Tolling agreements specify the duration of the suspension of the statute of limitations, providing parties with additional time to evaluate their positions and explore dispute resolution options. Defendants can use this time to develop a defense or negotiate privately, while plaintiffs can assess the strengths and weaknesses of their claims.

Essential Components of a Tolling Agreement

A comprehensive tolling agreement typically encompasses the following key elements:

  1. Party Information: Identifies the parties involved in the agreement.
  1. Start Date: Specifies the effective date when the agreement comes into force.
  1. End Date: Indicates the expiration or termination date of the agreement.
  1. Tolling Period: Defines the duration during which statutes of limitation, statutes of repose, or other defenses that the respondent may have against any claim by the claimant are suspended.
  1. Intent Not to Sue: Includes a commitment from the parties not to initiate litigation during the agreement's validity.
  1. Declaration of No Liability: Clearly states that no admission of liability is made by any party.
  1. Neutrality Statement: Affirms that the agreement is impartial and not biased in favor of any party.
  1. Waiver of Time-Based Defenses: Agrees that no party will assert time-based defenses that may accrue during the tolling period.
  1. Extension Agreement Date: Specifies the deadline for reaching an agreement for extending the tolling agreement.
  1. Party Signatures: Features the signatures of the relevant parties to validate the agreement.

What are the Consequences of Not Implementing a Tolling Agreement?

The ramifications of not utilizing a tolling agreement can vary for plaintiffs and defendants:

For Plaintiffs:

  1. Filing Within Statute of Limitations: A plaintiff may choose to file a lawsuit within the statute of limitations, preserving the claim. This initiates the legal process.
  1. Discovery and Settlement: Once a lawsuit is filed, parties can engage in discovery, gather more evidence, and explore potential negotiated settlements. However, the mere threat of litigation can sometimes motivate a defendant to settle. Filing the claim may eliminate this bargaining leverage.
  1. Insufficient Evidence: Without a tolling agreement, a plaintiff might lack sufficient factual evidence to proceed, and the legal claim may be lost due to the expiration of the statute of limitations or statute of repose.

For Defendants:

  1. Exposure to Lawsuit: Without a tolling agreement, a defendant may face the risk of personal, private, and potentially damaging information being exposed in a lawsuit filed by the plaintiff to preserve a claim.
  1. Potential Escape from Liability: Conversely, without a tolling agreement, there is a possibility that no claim will be filed, and the potential defendant may escape any liability.
  1. Privacy and Confidentiality: In some cases, a defendant may benefit from a tolling agreement by maintaining privacy and including confidentiality provisions in the settlement. This ensures that allegations and details of inappropriate conduct remain undisclosed.
  1. Counterclaims Consideration: In situations involving co-defendants, the absence of a tolling agreement may lead to the filing of counterclaims that may not be particularly productive. It's important to note that tolling agreements don't prevent the filing of counterclaims later but delay the decision while evaluating the plaintiff's evidence.

Recap of Consequences:

  • Plaintiffs must file a lawsuit or risk losing the claim.
  • Defendants face potential public accusations in a court of law or may escape liability altogether.
  • Co-defendants may need to file counterclaims, potentially weakening the argument that the plaintiff lacks a valid claim.

When to Consider Using a Tolling Agreement?

There are two key scenarios in which you should contemplate the utilization of a tolling agreement:

  1. Approaching Statute of Limitations or Repose: If the statute of limitations or statute of repose is nearing expiration, a tolling agreement can be beneficial. It provides additional time for evidence gathering, negotiation of settlements, or protection against adverse rulings when parties disagree on the start date of the limitations.
  1. Co-Defendant Situations: Tolling agreements among co-defendants, while less common, serve strategic purposes. In some jurisdictions, co-defendants may be required to file counterclaims before trial. Co-defendants may opt for a tolling agreement to extend the assessment period for the strength of a plaintiff's claims.

Additional Situations for Tolling Agreements:

  • Juvenile Plaintiff Involvement: In cases involving a juvenile plaintiff, tolling agreements may be relevant.
  • Bankruptcy Proceedings: Tolling agreements may also have applicability in certain bankruptcy proceedings.
  • Natural or Other Disasters: Exceptional situations like natural disasters can warrant the consideration of tolling agreements.

For plaintiffs, a tolling agreement is prudent when the statute of limitations or repose might impact their claim's viability. Likewise, defendants may find value in tolling agreements to safeguard against potential defense challenges arising from timing issues and to facilitate claim settlement negotiations.

FAQs

What is tolling in international trade?

A contractual arrangement where a designated quantity of raw material is processed through a specific processing facility during defined periods. For instance, an agreement to convert a set amount of alumina into aluminum at a particular aluminum plant.

What is an LNG tolling agreement?

Another prevalent commercial structure utilized by U.S. LNG export facilities involves the terminal operator exclusively liquefying gas on behalf of those holding interests in its production units. The majority of U.S. facilities, excluding those owned by Cheniere Energy Inc., operate under this framework.

Sample For Tolling Agreement

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