Records Retention Policies Should Highlight the Importance of Written Contracts

Generally, there are no hard and fast records retention policies for most business entities to follow. There is a glut of suggested time periods for specific records available.  In particular, many suggest that written contracts be retained for seven (7) years before destruction.  In Ohio, financial institutions are only required to keep certain delineated records for 1-6 years.  See Ohio Revised Code § 1109.69.  However, it is important to note the importance of written contracts when drafting any record retention policy.  The way written contracts are retained and discarded could have a substantial impact on future litigation.

The existence of at least a copy of a written copy, or lack thereof, will have a profound affect on the time period to file a lawsuit for its breach.  Ohio Revised Code § 2305.06 provides that actions on written contracts shall be brought within fifteen years after the cause thereof accrued.  As such, written contracts should be retained until the statute of limitations has expired for a breach of contract action.

Conversely, contracts not in writing have a much shorter limitations period.  In Ohio, contracts not in writing must be brought within six years after the cause of action accrued.  Ohio Revised Code § 2305.07.  Depending on the law of your state, if a business entity has not retained a written contract for a claim, you may be limited to only six years from the date of breach to file your lawsuit.  Many states have similar disparate limitations periods for actions on written or oral contracts.

A written contract is also very important when preparing a lawsuit for filing.  The Civil Rules typically require a copy of the written contract upon which the action is based to be attached to the Complaint.  Ohio Civil Rule 10(D) states that “[when any claim or defense is founded on an account or other written instrument, a copy of the account or written instrument must be attached to the pleading.”  If the account or written instrument is not attached, the reason for the omission must be stated in the pleading.

While the lack of written contract will not, per se, result in dismissal of your lawsuit, it will make it more difficult to prove your case.  Moreover, it will almost certainly delay proceedings.  Without a written contract, a Defendant may attempt to file a Motion for More Definite Statement, which will require a Plaintiff to submit a more definite statement of their claim for relief.  This is of particular concern when dealing with credit card accounts or other lines of credit when a written contract or application may be unavailable due to internal policy.

Moreover, the original copy of a written contract has very important evidentiary concerns when it comes to proving your case at Trial.  The "best evidence rule" provides, "[t]o prove the content of a writing, recording, or photograph, the original writing, recording, or photograph is required, except as otherwise provided in these rules * * *." Evid.R. 1002.  The "best evidence rule" rests on the fact that an original writing is more reliable, complete and accurate as to its contents and meaning.  Discover Bank v. Brockmeier, 2007 Ohio 1552, P17.  As such, efforts should be made to retain the original signed contract upon which your claim is based. 

In this day and age, keeping original copies of contract and documents may not be feasible.  The expense of storing documents in a physical warehouse may be burdensome for large entities, and scanning the documents in a database may be more appropriate.  The law does carve out an exception if the original contract is not available.  The original is not required, and other evidence of the contents of a writing is admissible if: 1) All originals are lost or have been destroyed, unless the proponent lost or destroyed them in bad faith; 2) The original is not obtainable; 3) The original is in possession of the opponent; or 4) The writing, recording, or photograph is not closely related to a controlling issue. Evid.R. 1004.  Clearly it is of the utmost importance to have at least a copy of a written contract to overcome evidentiary concerns.

Based upon the forgoing, the importance of written contracts as evidence in litigation is clear.  Proceeding to litigation armed with at least a copy of the written contract will allow you to more expeditiously resolve your claim, and will most likely lead to a better result.  It will also afford you the greatest amount of time to proceed with your claim before being forever barred.  As such, retention of written contracts should be more closely scrutinized as part of any record retention policy.