Key Takeaways

  • Accrued rights are legally enforceable entitlements that have been earned or vested before a contract ends or changes, and they remain valid afterward.
  • They commonly arise in employment, commercial contracts, intellectual property, and financial contexts, such as accrued salary, royalties, or interest.
  • These rights safeguard parties’ interests by ensuring obligations already earned — like payment for completed work — are not lost after termination.
  • Statutes of limitation, discovery rules, and surviving clauses in contracts all influence how and when accrued rights can be enforced.
  • Courts consistently uphold accrued rights to ensure fairness and prevent one party from evading responsibilities due to contract termination or amendments.

Accrued rights refer to rights that are established and backed by legal authority and are capable of demanding remedy to any wrongs committed. They also rights that could attach themselves to their principal as:

  • Accessories
  • Subordinate claims

The term could also be used as an original or independent demand that could happen, arise, or come into existence. For instance, “The right of action did not accrue within six years.”

Accrued Interest on Principal

It also refers to the accrued interest on the principal a depositor places in a savings account or stock ownership, so that the principal increases by the earned interest amount after a certain time.

Accrued Cause of Action

Accrued right could refer to a cause of action, i.e., the facts that grant the right to judicial relief to a person, and that accrues from the date the plaintiff's injury is sustained. In cases where the injury is not immediately discoverable, the cause of action will accrue once the injury is finally discovered by the plaintiff. This scenario is more frequent in cases involving malpractice or fraud.

For instance, a woman undergoes an appendectomy, and three years later, she still feels some pain on the right side. Another physician examines her and finds a bit of surgical sponge around the site of the surgical operation. Though the injury occurred three years earlier (at the time of appendectomy), the cause of action will accrue from the date the injury was discovered by the other physician.

Accrued Rights in Employment and Commercial Contracts

Accrued rights frequently arise in employment and commercial agreements, serving as a vital protection for parties when contracts end, are terminated, or are amended. In employment law, accrued rights include benefits such as unpaid salary, earned bonuses, accrued vacation time, or pension entitlements — all of which remain enforceable even after an employee leaves the company. Similarly, in commercial contracts, accrued rights may include earned commissions, milestone payments, or royalties that must still be paid despite contract termination.

For example, if a services agreement ends before payment is made for work already completed, the service provider retains a legal right to receive that payment. These rights cannot be retroactively removed by subsequent amendments or cancellations unless explicitly waived by the party entitled to them.

Statute of Limitations and Accrued Right

It is important to note this distinction due to the statue of limitations, which is the time stipulated by the law within which a court case or lawsuit must commence after the cause of action accrues. For cases that involve injuries that are not readily discoverable, it is unfair to bar the plaintiff from filing because the lawsuit did not commence within the stipulated timeframe.

Importance of Accrued Rights Clauses in Contracts

Because disputes often arise when a contract ends, most well-drafted agreements include an accrued rights clause — a provision that explicitly preserves each party’s rights and obligations that arose prior to termination. This ensures that once a right has accrued, it cannot be extinguished by the mere act of terminating or amending the contract.

A typical accrued rights clause states that termination is “without prejudice to any rights or obligations accrued prior to such termination.” Without such a clause, parties might face uncertainty over whether earned payments or claims for breach remain enforceable. Including this provision strengthens legal certainty and reduces the risk of litigation.

Sample Clauses: Surviving Obligations

Expiration, relinquishment, or termination of this agreement (with respect to one of its provisions or in its entirety) shall be done without prejudice to the rights which have accrued to either party under the agreement prior to its expiration, relinquishment or termination.

Such expiration, relinquishment, or termination shall not relieve the parties to the agreement from any obligations that were expressly stated to survive expiration or termination of this agreement.

Except if provided elsewhere, the expiration or termination of the agreement shall not affect any proviso which by implication or express statement is meant to either continue or come into effect on the expiration or termination of the agreement.

Termination of this agreement by a contracting party is not an exclusive remedy; other remedies will be made available to the terminating party, at law and in equity.

Expiration, relinquishment, or termination of this agreement (with respect to one or more countries or jurisdictions or in its entirety) shall be done without prejudice to the rights which have accrued to either party under the agreement prior to its expiration, relinquishment, or termination.

If the agreement is terminated (not in entirety) but with respect to terminated territory, the foregoing provisions (in respect to the terminated territory) will remain in effect to the extent they would survive and apply in the event of termination or expiration of the agreement in its entirety, and all non-surviving provisions in accordance with the above shall cease upon termination of the agreement and will no longer be in force.

Notwithstanding the expiration or termination of the agreement, neither contracting party is relieved from all obligation incurred prior to the expiration or termination of the agreement, including payment obligations that accrued before the termination. Upon expiration or termination of the agreement, each party will return all copies of documents and written confidential information to the other party.

Expiration, relinquishment, or termination of this agreement (with respect to one of its provisions or in its entirety) shall be done without prejudice to the rights which have accrued to either party under the agreement, including any royalty or payments owed prior to its expiration, relinquishment or termination.

Common Examples of Accrued Rights in Practice

Accrued rights appear across a wide range of legal and business scenarios. Some common examples include:

  • Employment: Unpaid wages, accrued vacation pay, earned bonuses, or pension entitlements owed upon termination.
  • Intellectual Property: Royalties due on patents or licenses for work completed before the agreement’s termination.
  • Commercial Contracts: Payment for goods delivered or services rendered before termination, even if invoicing occurs later.
  • Finance: Accrued interest on loans or bonds, which continues to be payable even after early repayment.
  • Litigation: A party’s right to sue for breach of contract or negligence that arose before the agreement ended.

These examples show how accrued rights function as a legal safety net, ensuring that parties receive what they are owed and can pursue remedies even after the contractual relationship ends.

Examples of Accrued Rights

In the case of Garratt vs. Ikeda1 NZLR 577 [2002], a deposit had not been paid as at the time of cancellation. In this instance, the right of deposit arose independent of the contract's cancellation. As such, whether the contract continued or not, the deposit had to be paid; therefore, it is an unconditional accrual. The court held that the vendor was entitled to enforce the payment of the deposit as an “unconditionally accrued right.”

Enforcement and Limitations of Accrued Rights

While accrued rights are generally enforceable, there are legal limitations that parties must understand. One key limitation is the statute of limitations, which sets a time period within which a claim must be filed. Failure to act within this window may bar enforcement, even if the right itself is valid. Additionally, accrued rights can be waived if a party knowingly and voluntarily relinquishes them — for example, through a settlement agreement.

Courts typically uphold accrued rights vigorously, particularly when a party attempts to escape liability by terminating a contract. In such cases, judicial decisions consistently emphasize that accrued rights “survive” termination and remain enforceable as a matter of fairness and public policy.

Frequently Asked Questions

  1. What are accrued rights in simple terms?
    Accrued rights are legal entitlements that have already been earned or vested under a contract before it ends. They remain enforceable even after termination or amendment.
  2. Do accrued rights continue after a contract is terminated?
    Yes. Unless expressly waived, accrued rights — such as payment for completed work or accrued vacation pay — survive termination and can still be enforced.
  3. Can accrued rights be waived or removed?
    They can be waived if the entitled party knowingly and voluntarily relinquishes them, often through a written agreement. However, they cannot be removed unilaterally.
  4. Why are accrued rights clauses included in contracts?
    Such clauses clarify that obligations and entitlements that arose before termination remain valid, reducing legal uncertainty and potential disputes.
  5. How do statutes of limitations affect accrued rights?
    Even if a right is valid, it must be enforced within the statutory period. If the deadline passes, the claim may be barred even though the right itself still exists.

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