This is an English translation.
The original Icelandic text, as published in the Law Gazette (Stjórnartíðindi), is the authoritative text. Should there be discrepancy between this translation and the authoritative text, the latter prevails.
2007 No. 150, 20 December
Effective as of 1 January 2008.
Article 1. Claims for money or other payments are subject to limitation periods in accordance with the rules of this Act, except as otherwise prescribed by law.
Any contract providing for the non-limitation of a claim shall be null and void.
Time limits under this Act are counted in years or months on the basis of full days with the day from which the period is calculated not included. If this day does not fall at the end of a month, the time limit shall expire on the last day of the month.
Article 2. The limitation period for a claim runs from the date on which a creditor is first entitled to demand performance.
For claims arising from a breach of contract, the limitation period runs from the date on which the contract is breached.
Where a contract can be terminated before its time for performance is due or a claim falls due before the date originally prescribed as a result of a debtor's non-performance or other circumstances, the limitation period for a claim runs from the date on which the creditor notifies the debtor that he will resort to termination or acceleration. If the creditor elects not to employ such recourses, the limitation period shall run from the due date originally decided.
If a seller or a previous vendor has guaranteed a sold article by undertaking remedy or assuming other liability, the period of limitation in respect of a claim based on such liability shall run from the date on which the buyer gives notice of the event on which the claim is based, and at the latest from the date on which the liability expires. The same shall apply if a person providing a service has guaranteed the result of such service.
Article 3. The general limitation period for claims shall be four years.
Article 4. The limitation period for claims in respect of deposits or assets submitted for safekeeping with a financial undertaking, public fund or other entity authorised by law to accept deposits from the public, in addition to interest on such claims, shall expire 20 years from the date on which such assets were submitted. A new limitation period shall begin to run when the creditor has gained control of the assets by withdrawing them or depositing assets in the account.
However, a claim pursuant to paragraph 1 shall only become barred if the recipient of the assets makes the creditor or his heirs aware in a timely and verifiable manner that the claim is due to become barred.
Article 5. The limitation period for claims in respect of bonds or claims which have been electronically registered in a securities depositary is ten years. The limitation period under this provision does not apply to interest, price-level adjustments, company dividends and payments pursuant to Article 6.
The ten-year limitation period shall also apply to claims based on loans of money. However, this shall not apply to loans granted by a seller or any other person for financing purchases on credit. The limitation period under this provision shall not apply to interest and price-level adjustments.
Article 6. A claim which has been agreed or established in respect of pensions, annuities, maintenance allowances or other contribution accruing at specific intervals and not representing instalment payments on a principal, shall be subject to a limitation period of ten years from the date on which the last instalment was paid. If no payment has been made, the limitation period shall run from the date on which the creditor could have demanded the initial payment. Individual due instalments are furthermore subject to the limitation period under Article 3.
Article 7. When a claim is secured by a guarantee or other similar security, the limitation period shall run, in respect of the guarantor, in accordance with the same rules that apply to the principal claim. The fact that a claim cannot be enforced against the guarantor before payment has been unsuccessfully sought from the principal debtor, or that the guarantee in other respects is of a subsidiary nature, does not affect the calculation of the limitation period.
Article 8. If more than one debtors are liable to a creditor and one of them discharges his obligation before the limitation period of his claim has expired, the period of limitation for his claim against a co-debtor shall run for four years from the discharge of the obligation. However, the claim shall not become barred before the end of the limitation period to which he would have been entitled if the discharged claim had been transferred to him. The same applies to a guarantor's recovery claim against the principal debtor or a co-guarantor.
Article 9. Claims for damages shall be subject to a limitation period of four years from the date on which the injured party obtained, or should have obtained, necessary knowledge of the damage and the person liable for the damage. However, the limitation period in respect of claims for damages for physical injury, including non-pecuniary damage, shall run for ten years.
However, the claim shall become barred no later than 20 years after the event of damage or other basis for liability ended. This does not, however, apply to physical injury if:
b. the person responsible, or a person for which that person is responsible, was aware, or ought to have been aware, before the event of damage ended, that the conduct could result in a threat to life or serious damage to health.
This Article does not apply to claims based on a contract, except for claims concerning physical injury.
Article 10. If a creditor has not declared a claim because he lacked the necessary knowledge of the claim or of the debtor, the period of limitation shall expire at the earliest one year after the date on which the creditor obtained or should have obtained such knowledge.
If the limitation period cannot be interrupted on the basis of Icelandic or foreign law, or for reasons of other insurmountable hindrance not ascribable to the creditor's own circumstances, the limitation period shall expire at the earliest one year after the date on which the hindrance ceased.
The limitation period pursuant to this Article cannot be extended by more than ten years from the date on which the claim concerned would otherwise have become barred. The limitation period prescribed in paragraph 2 of Article 9 cannot be extended pursuant to this Article.
Article 11. Even if a limitation period has expired, a claim for damages may be made in criminal proceedings in which a debtor has been found guilty of the act providing the grounds for the claim for damages. Such claims may also be brought in separate proceedings instituted within one year after a judgment of conviction has been rendered in a criminal case. The same shall apply where the debtor has been subjected to sanctions for the offence.
Article 12. If a legally incapable person has a claim against a guardian or public trustee, or if a legal person has a claim against a director or managing director, the limitation period for a claim in respect of liability arising from such legal relationship shall expire at the earliest one year after the debtor concerned left his position. If a party qualified to assert the claim on behalf of the creditor obtains knowledge of the circumstances on which the claim is based before such time, the limitation period shall begin to run from this earlier date even if the debtor concerned has not left his position. This rule shall also apply to the claim of a bankrupt against the executor of the estate in connection with the latter's duties.
With regard to a claim arising from a member's obligation to make a contribution to a company's assets in accordance with the company's articles of association, the limitation period shall only begin to run when the membership has ceased and the company has been notified to such effect.
Article 13. If a public notice has been issued in accordance with the law inviting creditors to declare their claims within a certain time limit, the limitation period of the claim shall not expire before such time limit has passed. Claims declared within the proper time limit shall not be barred until one year has passed from the expiry of the time limit for declaring claims. Article 18 and paragraph 2 of Article 22 shall apply in the case of bankruptcy proceedings or public division of a deceased person's estate.
Article 14. A limitation period shall be interrupted when a debtor expressly, in word or in deed, acknowledges his debt to a creditor, for example by a promise to pay or by payment of principal, price-level adjustments or interest.
Article 15. A limitation period shall be interrupted when a creditor takes legal action against a debtor to obtain a judgment regarding the claim, or when a claim for set-off is lodged in a court of law. A limitation period shall also be interrupted when a creditor takes legal action to obtain a declaratory judgment regarding the claim or submits the matter to arbitration pursuant to a contract.
If satisfaction of the claim is sought in a court of law, the limitation period is interrupted by the institution of proceedings or by the submission of a statement containing a counter-claim for set-off.
If a dispute can or must be submitted to arbitration under a contract or law, the limitation period shall be interrupted by the creditor taking such steps as are necessary to institute the proceedings. If a claim for set-off is submitted in such a case, the limitation period for that claim shall be interrupted at the time of the submission.
Article 16. A limitation period is interrupted when a creditor submits the claim for decision by an administrative agency specifically empowered to resolve a dispute in respect of the claim. This applies even if the decision can be appealed to another agency or a court of law. If the case is prepared by another administrative agency, it is sufficient that the claim should be brought before such agency.
The provisions of paragraph 1 shall also apply to claims which are brought before appeals or complaints boards established by the debtor or the trade organisation of which he is a member or with their participation. The same applies if appeals or complaints boards have been established in accordance with statutory provisions or if a debtor accepts that the claim should be brought before an active appeals or complaints board.
Article 17. If a creditor has a legal basis for the enforcement of his claim against a debtor, the limitation period is interrupted when a request for enforcement is received by a district court judge or district commissioner, provided that the conditions of Article 52 of the Enforcement Act and paragraph 2 of Article 12 of the Distress Sale Act are satisfied.
In respect of maintenance payments to be collected in a foreign state, the limitation period is interrupted by the person entitled to the payment presenting a request for such collection to the competent authority in Iceland or the foreign state in accordance with an agreement between Iceland and the state concerned.
Article 18. The limitation period for a claim is interrupted when a district court receives a petition for bankruptcy proceedings or public division of a deceased debtor's estate for enforcement of the claim.
If a debtor's estate is subjected to bankruptcy proceedings or public division in the case of a deceased person's estate, the limitation period is interrupted by declaring the claim to the estate prior to the expiry of the time limit for declaring claims.
The interruption of a limitation period pursuant to paragraphs 1 and 2 shall also be effective for a bankrupt and a debtor's heirs.
Article 19.If the limitation period of a claim against one or more debtors is interrupted by the institution of proceedings in accordance with Article 15, the claim against another debtor will not be barred if such debtor is summoned to defend his interests in the case before the limitation period of the claim against him expires. Subsequently, the creditor must proceed with his claim against that debtor within one year after the case has been concluded by settlement, judgment or in some other manner.
The same shall apply if the person against whom proceedings are instituted wishes to bring a recovery claim against another person for the amount he may be required to pay.
Article 20. When a limitation period is interrupted by the acknowledgment of a debtor under Article 14, a new limitation period shall begin to run under the provisions of this Act from the date of acknowledgement of the claim or from such later date as the creditor at the earliest has the right to demand performance.
Article 21. If a limitation period has been interrupted on the basis of Articles 15-17, a new limitation period shall not begin to run while the proceedings are in progress.
If a claim is established by judgment or settlement or by admission in the course of proceedings in accordance with Article 16, a new limitation period of ten years shall begin to run. This new limitation period shall run from the date on which judgment was rendered, settlement was reached or the claim admitted or from such later date as the creditor at the earliest has the right to demand performance. Claims for subsequently accrued interest, price-level adjustments or company dividends are subject to the limitation period provided for in Article 3.
If enforcement proceedings under paragraph 1 of Article 17 are instituted against a debtor without the creditor obtaining full satisfaction of his claims, a new limitation period shall begin to run from the date on which the enforcement proceedings were concluded. A corresponding limitation period shall begin to run from such time as a request is submitted under paragraph 2 of Article 17.
Article 22. If legal action taken in accordance with Articles 15 or 16 against a debtor is dismissed from court or from another competent authority, or if it is abandoned, the creditor may institute new proceedings or refer the matter again to the same authority even if the limitation period has expired, provided that this is done within six months. The same shall apply if the subsequent case or cases are dismissed or abandoned without a substantive judgment.
If a petition for bankruptcy proceedings or public division of the estate of a decease person is not accepted, the limitation period shall be interrupted for six months from the date on which the claim was rejected.
Article 23.If a limitation period is interrupted by the institution of proceedings in a foreign state, such interruption shall apply in Iceland for as long as the proceedings are in progress. Paragraph 1 of Article 22 shall apply if the case does not conclude with a substantive judgment, as applicable.
If a claim is established by judgment or court settlement in a foreign state, a new ten-year limitation period shall begin to run in accordance with paragraph 2 of Article 21, provided that such resolution is compatible with the Icelandic legal system.
Article 24. Upon barring, a claim is cancelled and the creditor loses his right to performance. Barring also cancels interest, price-level adjustments, dividends and other additional payments.
Article 25. If a claim against one of more debtors is barred, this has no effect on other debtors except as otherwise agreed.
If a claim is secured by a guarantee, the claim against the guarantor shall be barred if the principal claim becomes barred as a result of limitation before the limitation period vis-à-vis the guarantor is interrupted in accordance with Articles 15-19, unless otherwise agreed by contract.
Article 26. The barring of a claim does not have the effect that the creditor loses his right of set-off if such right has been contracted or if the claims derive from the same legal context and the principal claim has arisen prior to the barring of the counter-claim.
Article 27. The barring of a claim has no effect on mortgage rights and rights of retention, and such security rights shall remain unaffected even if the claim which they are intended to secure is cancelled due to barring. However, this does not apply in the following cases:
b. A mortgage in respect of claims for interest or other claims for payment which fall due at regular intervals and which do not represent instalment payments of a principal, shall lapse upon the barring of the claim.
Article 41 of the Act on contractual liens applies to the cancellation of a seller's lien.
In respect of rights in the form of payment obligations attached to real property, only individual payments shall be subject to barring.
Article 28. This Act shall enter into force on 1 January 2008. This Act applies only to claims established following its entry into force.