Canada: Can Commercial Parties Agree To Extend, Reduce, Exclude, Or Otherwise Vary A Statutory Limitation Period?

Limitation periods determine the period of time within which one party (whether and individual, corporation, or other entity) must commence a lawsuit against another party. In Canada, limitation periods are primarily defined by provincial statutes and, effectively, act as time limits for commencing such lawsuits. If a person brings a lawsuit after the expiry of the applicable limitation period, then a court may dismiss the lawsuit.

Applicable legislation in Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia each prescribe a basic limitation period of two years from the date the loss or damage was discoverable.¹ However, from time to time, commercial parties may wish to extend, reduce, exclude, or otherwise vary these statutory limitation periods. This blog post explores whether statutory limitation periods can be modified by commercial agreement in those provinces.

(This blog post will be the first in a series of three blog posts discussing how parties can agree to modify applicable time limits for bringing lawsuits against one another. For further reading, please stay tuned to the "Blogs and Insights" page on our website.)

MODIFYING BASIC LIMITATION PERIODS

All of the provinces discussed below typically have two-year limitation periods in their legislation:

Ontario

In Ontario, the basic limitation period may be suspended, extended, varied, or excluded pursuant to a "business agreement" (being an agreement where neither party is a "consumer" within the meaning of applicable consumer protection legislation) pursuant to sections 22(3) and 22(5) of the OLA. Note, the agreement must have been entered into on or after October 19, 2006.

Manitoba

Pursuant to section 24(1) of the MLA, which recently came into force on September 30, 2022, the basic limitation period for a claim may be extended by written agreement between two parties but cannot be shortened by agreement.

Saskatchewan

Section 21(1) of the SLA states a basic limitation period may be extended by agreement. However, the SLA is silent on whether commercial parties can agree to reduce a basic limitation period, and this issue does not appear to have been definitively decided at common law. Accordingly, it is uncertain whether commercial parties can agree to reduce a basic limitation period in Saskatchewan.

Alberta

In Alberta, the basic limitation period may be extended (pursuant to section 7(1) of the ALA) by written agreement between two parties. However, section 7(2) states the basic limitation period cannot be reduced by agreement.

British Columbia

Section 24 of the BCLA states the basic limitation period is extended where a person acknowledges liability and sets the date of discoverability as the date on which the acknowledgement was made. This seems to be the only mechanism in the BCLA that provides for an extension or alteration of the basic limitation period.²

However, the BCLA is silent as to whether commercial parties can agree to modify the basic limitation period. Although the issue does not appear to have been definitively decided at common law, the Supreme Court of British Columbia in Beishuizen v. Dilon³ (citing principles from a decision of the Court of Appeal for British Columbia in Rosas v. Toca⁴), noted as follows: "[a]lthough section 24 of the Limitation Act provides specific ways a limitation period can be extended or renewed, nothing in that section or elsewhere in the Act prohibits contracting parties from agreeing to vary a limitation period."

Accordingly, while it has not been definitively decided whether it is possible to extend or reduce the basic limitation period in British Columbia, the case law appears to suggest parties to a commercial contract may be able to do so.

ULTIMATE LIMITATION PERIODS

It is also important to note the provincial legislation discussed above also provides for ultimate limitation periods after which no action is available regardless of discoverability principles.⁵ In other words, it does not matter if a party has discovered the potential claim; once the ultimate limitation period has passed all actions are, usually, statutorily barred.

In most provinces, the ultimate limitation period is 15 years after the day on which the act or omission took place, see for example: MLA s. 10(1)⁶; BCLA s. 15; OLA s. 15; SLA s. 7. Alberta, however, defines its ultimate limitation period at 10 years, see the ALA at s. 3(1)(b) and 3(1.1)(b).

Furthermore, and subject to some exceptions ultimate limitations periods cannot be extended by agreement, see the following sections: MLA s. 24(2); BCLA; OLA; SLA s. 21(2). There are two exceptions.

The first is Ontario, where the ultimate limitation can be suspended or extended by agreement, pursuant to section 22(3), but only where the relevant claim has already been discovered. The second is Alberta, where the legislation only speaks to altering "a limitation period provided by this Act" (s. 7(1). The ALA does not discuss whether this ability to alter the limitation period applies to the basic limitation period, ultimate limitation period. The language suggests it applies to both.

OTHER CONSIDERATIONS

Commercial parties should be aware that the enforceability of any agreement which purports to extend, reduce, exclude, or otherwise vary a statutory limitation period will depend on several factors, including the nature of the agreement, the wording of the particular clause purporting to modify the limitation period, the relationship between the contracting parties, and the applicability of any specific legal doctrines which may affect enforceability (such as capacity, duress, undue influence, and so on).

We recommend obtaining legal advice before entering into any contract containing a clause attempting to modify a statutory limitation period. Should you have any questions about varying limitation periods in a commercial contract, please do not hesitate to contact our firm.

Footnotes

1. Note: Most legislation will also provide for certain exceptions to the basic limitation period. Such topic is beyond the scope of which is article. We recommend reviewing the relevant legislation or speaking to legal counsel to determine if you are subject to a limitation period.

2. Note: Most provinces have a similar mechanism stating an acknowledgement of liability moves the date of the act or omission to the date of the acknowledgement, essentially, "restarting" the basic limitation clock. See MLA s. 24; SLA; s. 11; ALA s. 8; Ola s. 13.

3. Beishuizen v. Dilon, 2021 BCSC 2682, para. 54.

4. Rosas v. Toca, 2018 BCCA 191, para. 69.

5. The Manitoba legislation (the MLA) is very new and came into force on September 30, 2022. The MLA provides that a claim for any loss or damage which was discovered prior to that date must be commenced no later than September 30, 2024 (unless the previous legislation called for a shorter limitation period, in which case the shorter limitation period applies instead). Any loss or damage which occurred before September 30, 2022, but was not discovered until after that date, is now treated as if it occurred on September 30, 2022.

6. The MLA provides an ultimate limitation of 30 years for Aboriginal claims (s. 10(2)) and 2 years for claims regarding purchases for value in good faith (s. 10(3)).

Originally published January 10, 2023

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.