Missed Payments, Lost Claims: What a New N.C. Case Means for Long-Term Contracts

By Braden Rose and Andrew Atkins

Construction contracts often contemplate periodic payments over several years. If a dispute arises years later, the statute of limitations may bar any claims for recovery. A recent North Carolina Court of Appeals decision, Outer Banks Ventures, Inc. v. Currituck Cnty., demonstrates the importance of careful drafting to preserve claims. No. COA25-798 (N.C. Ct. App. 2026). North Carolina’s statute of limitations typically starts running from a party’s first breach of contract and applies to all subsequent breaches. Installment contracts can avoid this obstacle by treating each breach in a chain as a distinct cause of action. In Outer Banks Ventures, the Court of Appeals determined in a 2-1 decision that a private developer’s 1986 agreement for periodic payments was not an installment contract, thereby time-barring the plaintiff’s claims.

What Happened in Outer Banks Ventures?

The underlying contract required the private developer plaintiff to construct residential water and sewer facilities and transfer ownership of the facilities to a utility company in exchange for connection fees and $250 for each new customer who connected to the facilities. The contract made payments due to the plaintiff every six months. When the utility company assigned the contract to defendant Currituck County on July 18, 2011, the County stopped making payments to plaintiff. Plaintiff filed suit twelve years later in 2023, well past North Carolina’s two-year statute of limitations for actions against a local government under N.C. Gen. Stat. § 1-53(1) if the statute of limitations ran from the time of the first breach. Outer Bank Ventures argued that the statute of limitations had not run on the payments that would have been due within the two years before it filed suit.

Why Did the Court Reject the Installment Contract Theory?

The majority concluded that the parties’ agreement lacked the essential qualities of an installment contract. Specifically, the Court reasoned that “there is no express language defining what constitutes a default . . . nor is there any express provision allowing Plaintiff to seek recovery of the payments as they become due.” The Court also emphasized that the County’s payment obligations were discretionary, and dependent on it taking action to connect new utility customers.

In a dissenting opinion, the Hon. Judge John Tyson argued that plaintiff had an installment contract which afforded some protection under the statute of limitations. Specifically, Judge Tyson pointed out that defendant did not have discretion to take action because anyone who qualified and paid fees could connect to the facilities. The dissent further noted that the contract’s unambiguous “shall reimburse” language and a savings provision supported treating each six-month payment as an independent obligation. This dissent may pave the way for further review by the Supreme Court of North Carolina.

What Parties Should Do Now

In the meantime, Outer Banks Ventures offers practical guidance for parties seeking to preserve independent claims for default. Parties entering into long-term contracts with recurring payment obligations should consider:

1. Including language that defines what constitutes a default;
2. Stating that each missed payment is a separate breach and independent cause of action;
3. Allowing recovery of payments as they become due;
4. Avoiding discretionary payment language where continuing payment rights are intended; and
5. Acting promptly after the first missed payment, rather than assuming later missed payments will remain recoverable.

The bottom line: Long-term payment rights should be drafted clearly, and parties should not wait to act after a missed payment.

If you have any questions about how this decision may affect your long-term contracts or recurring payment obligations, please contact Andrew Atkins, Braden Rose, or your regular Smith Anderson attorney.