Canada: Demand Obligations — Divergences in Provincial Limitation and Prescription Periods


The recent ruling of the Ontario Court of Appeal in Bank of Nova Scotia v. Williamson, 2009 ONCA 754 provides an opportunity to address the divergent ways that limitation periods in different provinces apply to various forms of demand obligation.

Demand obligations play a key role in many financing transactions, and fall into two broad categories: (i) primary demand obligations (such as demand promissory notes and demand mortgages), and (ii) secondary demand obligations (such as demand guarantees and third-party demand collateral mortgages). Each form of demand obligation has its own specific legal characteristics.

Of particular significance to both lenders and borrowers is the limitation period (or, in Québec, the prescription period) applicable to both primary and secondary demand obligations. A limitation or prescription period is, of course, the time frame within which a creditor must commence a legal proceeding against the borrower, guarantor, or other obligor, seeking to enforce the obligation in question. Once the limitation or prescription has expired, the right to commence such an enforcement action is generally lost.

Limitation and prescription periods are established by provincial legislation. Thus, the limitation or prescription applicable to a particular demand obligation will flow from the provincial law selected by the parties to govern their relationship more generally. The law varies from province to province as to both the length of the relevant limitation or prescription period and the date this time begins to run. This fact may make the parties' selection of the relevant governing law a potentially important negotiating point.

Recent Developments in Ontario

In its recent Williamson ruling, the Ontario Court of Appeal considered the limitation principles applicable to various categories of demand obligation, both historically and in light of significant amendments made to the Ontario Limitations Act, 2002 in November 2008. This Act establishes a "basic limitation period" of two years, applicable to most claims falling under it. The period begins from the date a claim arises or from the date it is first reasonably discoverable by a plaintiff.

Ontario limitations legislation had, prior to the November 2008 amendments, been silent with regard to demand obligations. However, the common law had developed distinctly different approaches to the running of those limitation periods applicable to primary and secondary demand obligations:

  • With regard to secondary obligations, such as demand guarantees or third-party demand collateral mortgages, the relevant limitation period only began running against the creditor after the creditor had actually made the requisite demand against the obligor.
  • In contrast, a more draconian common law principle applied to creditors seeking to enforce a primary obligation (e.g., a demand promissory note or a demand mortgage). In such cases, the relevant limitation period was deemed to commence running immediately (i.e., from the date that the primary demand obligation came into existence), rather than at the point in the future when the demand was actually made.

These common law rules had been in force in Ontario for many years, and in earlier rulings the Court of Appeal had confirmed that they continued to apply even after the coming into force of the Ontario Act on January 1, 2004. (See Hare v. Hare (2006), 83 O.R. (3d) 766 (C.A.) and The Mortgage Company of Canada v. Grant Estate, 2009 ONCA 655.)

The potential confusion flowing from these common law rules was finally addressed in November 2008, when the Legislature amended the Ontario Act to ensure that the limitation period applicable to "demand obligations" (an undefined term) would only commence running after a demand had actually been made by the creditor against the obligor. This amendment was made retroactive, so that it applied to every "demand obligation" created on or after January 1, 2004.

In interpreting this retroactive amendment, the Court of Appeal in the Williamson case has confirmed that the traditional common law rule governing the running of the limitation period applicable to demand promissory notes (as primary obligations) has been radically changed, and has been made consistent with the very different rule previously applicable to demand guarantees (as secondary obligations). The Court of Appeal accepted that, for both categories of "demand obligation" created after January 1, 2004 and governed by Ontario law, the relevant limitation period will only commence running after a demand has actually been made by a creditor against an obligor.

An interesting fact that was not expressly addressed by the Court of Appeal in Williamson is that certain key limitation periods applicable to mortgages appear in a separate statute, the Ontario Real Property Limitations Act. Since the Legislature has not yet implemented parallel amendments specifically addressing "demand obligations" in that latter statute, the running of such limitation periods against both demand mortgages and demand collateral mortgages may require further judicial clarification.

The Governing Principles in Québec

There is no specific provision in the Civil Code of Québec regulating the starting date of the prescription or limitation period for a demand obligation. According to the generally applicable rules of prescription, the prescription period for a demand obligation is three years beginning from the date of the cause of action of the creditor.

Regarding demand loans, under the law of Québec prescription begins to run on the date of the advance of funds. (See Charron v. Investissement Royal Montréal Inc., 2008 QCCS 157; and 9022-8818 Québec inc. (Magil Construction Inc.) (Syndic de) 2005 QCCA 275).) Similarly, the prescription period for a demand note begins on the date of issuance of the note, rather than on the date of presentation for payment. (See Stone (Syndic de), 2007 QCCA 534; and G.G. Guertin inc. v. Sevan, 2008 QCCQ 12724.)

Regarding demand suretyships or demand guarantees, prescription begins to run on the date of the default of the principal debtor.(See Caisse populaire Desjardins de la Vallée de l'Or v. Dion, 2001 CanLII 2403 (C.S.); Banque Nationale du Canada v. Campeau, 2003 CanLII, 20051 (C.Q.).) The starting date for prescription of the claim against the surety may, however, be affected by the terms of the contract of suretyship where, for example, it requires a formal demand against the surety prior enforcing a claim against him.

The Governing Principles in British Columbia

Similarly, the British Columbia Limitations Act does not specifically provide for creditors' claims. Consequently, these claims are captured by the BC Act's general six-year limitation period, calculated from the date that the right to bring a cause of action arises. British Columbia has not made any legislative changes to the common law principles governing primary and secondary demand obligations.

For primary demand obligations, the limitation period runs from the date the obligation is created. For example, the limitation period for a demand promissory note runs from the date the note is made and the funds are advanced. (See Berry v. Page (1989), 38 B.C.L.R. (2d) 244 (C.A.); Barclay Construction Corporation v. Bank of Montreal (1988), 28 B.C.L.R. (2d) 376 (S.C.); and Ponti v. Marathon Motors Limited (1978), 9 B.C.L.R. 46 (Co. Ct.).)

For collateral demand obligations, such as demand guarantees, the six-year limitation period runs from the date of the demand. (See Canadian Imperial Bank of Commerce v. Sayani (1994), 100 B.C.L.R. (2d) 294 (S.C.); and Canadian Imperial Bank of Commerce v. Pittstone Developments Ltd. (1985), 69 B.C.L.R. 292 (S.C.).)

The Governing Principles in Alberta

Under the previous limitations regime, and subject to the wording of the governing document, claims in Alberta respecting a breach of contract (including a claim pursuant to a collateral demand obligation, such as a guarantee) were subject to a six-year limitation period running from the date of the breach and not from the date the breach was discovered. (See Alberta Treasury Branches v. Jarvis Engineering [1998] A.J. No. 285 (Master); and James H. Meek Trust v. San Juan Resources Inc., 2005 ABCA 448.)

For a primary demand obligation, such as a promissory note, a six-year limitation period applied, running from the date the obligation was created. As a result, the limitation period began to run from the date a promissory note was signed. (See Royal Bank v. Dwigans, [1933] 1 W.W.R. 672 (Alta. C.A.); and Canada Trustco Mortgage Co. v. 112293 Holdings Ltd., [1984] A.J. No. 126 (C.A.).)

With the coming into force of the current Alberta Limitations Act, the law on point appears to have changed. The Alberta Act provides that a claim is statute barred after the expiry of the earlier of (i) a two-year limitation period (running from the date the claim should have been reasonably discovered), and (ii) a 10-year ultimate limitation period (running from the date the claim arose). It further provides that the limitation period provided by the Alberta Act can be extended by express agreement.

The Alberta Act makes specific reference to "demand obligations" (an undefined term), and provides that the ultimate limitation period commences running upon the default of the obligor, after a demand has been made.

The Alberta Court of Queen's Bench has noted the apparent change to the law with respect to demand obligations, but has declined to engage in an interpretation of the Alberta Act on that point. (See Kendell v. Kendell, [2006] 411 A.R. 332.) Accordingly, the effect of the legislative change in Alberta is not yet clear. A plain reading of the Alberta Act would seem to suggest that both collateral and primary demand obligations are subject to a two-year discoverability limitation period and an ultimate limitation period of 10 years, with the latter period running only after a demand for performance has been made.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.