What is the Purpose of a Tolling Agreement?

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What is the Purpose of a Tolling Agreement?

A tolling agreement is a formal agreement between potential parties to a legal dispute to extend the statute of limitations on a plaintiff’s legal claim. It is typically used to give the parties additional time to resolve their dispute outside the courtroom while preserving the plaintiff’s right to pursue a claim that may otherwise be lost due to a statute of limitations.

While a tolling agreement may seem to primarily benefit a plaintiff, there are also some good reasons why a defendant would want to enter into a tolling agreement. One reason is to give a plaintiff additional time to assess the viability of their claim; without tolling a statute of limitations that is about to expire, a plaintiff may be forced to file suit just to meet a deadline. If there is a chance that litigation may be avoided altogether, it could be beneficial for a defendant to agree to waive the statute of limitations for a certain period of time or until certain conditions are met.

Consenting to a tolling agreement can also be more about business than litigation strategy. If the parties have enjoyed a mutually beneficial business relationship in the past and hope to do so in the future but still want to preserve their legal rights, a tolling agreement can accomplish this.

In addition, should negotiations fail to resolve the matter, the implied threat of litigation can act as a catalyst in compelling both sides to settle the dispute. By settling, both parties can potentially benefit — the plaintiff by getting necessary concessions or damages from the defendant without the defendant having to bear the costs of litigation and a potentially disastrous judgment.

Even with the additional negotiating space a tolling agreement provides, if the negotiation fails, the plaintiff may still pursue litigation. In that case, the defendant may benefit from the process by being better informed about the plaintiff’s claims. Conversely, the plaintiff can benefit by including provisions in the tolling agreement that can compel a defendant to produce documentation that may otherwise not be available to the plaintiff except in the discovery phase of a trial.

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