What Is a Standstill Agreement?

When parties are engaged in a legal dispute, they should treat court proceedings as a last resort. However, for most civil claims, there is a deadline by which the claimant must issue proceedings. With this deadline approaching, parties may require additional time to help them resolve matters through alternative dispute resolution (for example, negotiation or mediation) before incurring the costs or risks of court proceedings. 

In England and Wales, standstill agreements can be a valuable mechanism to address this. Here, we explain how they work, when individuals and businesses use them, and their pros and cons. If you are in a dispute and have been advised to consider a standstill agreement or are considering whether one is appropriate, for expert advice, contact Helix Law. 

What Is the Purpose of a Standstill Agreement?

The Limitation Act 1980 prescribes periods of time, from a breach of contract or duty, or in other types of cases from the date damage is suffered, typically 6 but sometimes 12 years, in which the claimant must issue court proceedings or the defendant will have a complete defence to the claim because it will be statute barred. This is known as the limitation period. 

A standstill agreement is an arrangement to temporarily stop the clock running on the limitation period, to explore alternative dispute resolution whilst allowing the claimant to preserve their claim.

How Do They Work?

When a legal deadline approaches, parties will communicate and agree to pause the timeline. They must establish the precise terms and duration and draft this into a written document. Once they iron out the details, they must both sign the agreement. 

The agreement usually refers to each party’s obligations, any restrictions, the length of the arrangement, conditions that may terminate the arrangement early, and the consequences of breaching the agreement. It is legally binding as long it complies with the necessary formalities. The defendant can rely on a limitation defence assuming that the claim is still issued within time, accounting for the additional time created by the standstill agreement. 

Pros and Cons of a Standstill Agreement

Pros

Avoiding Court Proceedings

An agreed pause in in the limitation period offers additional discussion time, which can help avoid legal proceedings. Going through court is usually intense time-consuming and exspensive, so a structured negotiation period increases the chances of parties reaching a settlement

Minimising Costs

Court and legal fees can quickly mount, especially in complex disputes. By avoiding court proceedings, litigants can achieve significant savings. 

Cons

No Guarantee of Resolution 

While a standstill can be invaluable for reaching out-of-court settlements, it isn’t guaranteed. If discussions don’t go as planned, there is still a risk that the dispute will escalate and become hostile. 

Weakened Position 

Agreeing to pause legal deadlines can expose the weaker party. For example, if a claimant readily agrees to a standstill, this could be perceived as a lack of belief in their claim’s strength. The respondent can then use this advantage in negotiations to achieve a more favourable outcome. 

Drafting Issues

The arrangement’s terms must be carefully drafted to avoid ambiguity and the potential for further dispute. Although they sound straightforward, the agreements can be lengthy and complex, so poorly drafted terms could invalidate the document or lead to satellite litigation. 

Alternatives to a Standstill Agreement

While standstill agreements may be the best option in some cases, there are various other mechanisms parties could also use:

• Commence proceedings: One main alternative is to simply issue proceedings. Parties can then agree to a ‘stay’ in proceedings to give them additional time to comply with the necessary formalities and conduct settlement discussions. 
• Alternative Dispute Resolution (ADR): In less time-sensitive cases, parties can try to settle matters through ADR. Options include mediation and arbitration, which are effective ways to resolve disputes quickly and at a lower cost. 

Frequently Asked Questions

What Is the Purpose Of a Standstill Clause?

A standstill clause temporarily extends the time in which a claimant has to issue court proceedings before the defendant can rely on a limitaiton defence. 

How Long Does a Standstill Agreement Last?

The duration depends on the specific terms negotiated by the parties. Depending on the circumstances and the agreement’s purpose, it can range from a few weeks to several months or even years. Either way, the parties must clearly state the duration in the written agreement. 

What Is an Example of a Standstill Clause?

An example of a standstill clause is as follows: “The Parties agree that, for a period of six months from the date of this agreement, the expiry of any limitation periods shall be suspended, and neither party shall commence any legal proceedings relating to this dispute.

Final Thoughts

Standstill agreements require expert advice and drafting. If you have a claim which is nearing limitation or you’re considering a standstill agreement or need legal advice on dispute resolution, our team at Helix Law can provide expert guidance tailored to your situation. Contact us today to discuss your options.