Can a Statutory Limitation Period be Varied by Agreement?

What is a limitation period?

Generally speaking, a limitation period is a time limit for a person to commence legal proceedings as a result of some loss or damage. Limitation periods vary from province to province: applicable legislation in Alberta, British Columbia, Ontario and Saskatchewan each prescribe a basic limitation period of two years from the date that the loss or damage was discovered, while applicable legislation in Manitoba prescribes a basic limitation period between one to six years depending on the nature of the claim. If a person does not commence legal proceedings within the applicable time limit, then any claim is considered to be statute barred (except in special circumstances) and may be dismissed by the courts.

However, it is not uncommon for parties to a commercial contract to attempt to vary a limitation period by agreement. Parties may seek to either extend or reduce a limitation period by agreement. A key question for these types of commercial agreements is: can a statutory limitation period be varied by agreement? We outline the variances across jurisdictions below.

Alberta

Section 7(1) of the Limitations Act (Alberta) provides that the basic limitation period may be extended by agreement. However, this is subject to certain requirements: in particular, a party who is adversely affected by this extension must acknowledge and agree to the extension in writing.

However, section 7(2) of the Limitations Act (Alberta) provides that the basic limitation period cannot be reduced by agreement. Rather, any agreement that purports to reduce the basic limitation period is made invalid by this provision of the statute.

Accordingly, parties to a commercial contract in Alberta may agree to extend a basic limitation period, but cannot agree to reduce it.

British Columbia

The Limitation Act (British Columbia) is silent as to whether the basic limitation period may be extended or reduced by agreement. Further, the issue does not appear to have been decided at common law in British Columbia. However, in Rosas v. Toca, 2018 BCCA 191, the Court of Appeal for British Columbia suggests that it may be possible:

[70]        Assuming without deciding that it is open to the parties to contract around the limitation period, even if Henderson J.A.’s line of reasoning was not explicitly rejected by Rand J., in my view the Supreme Court of Canada’s decision in Hunter Engineering Co. v. Syncrude Canada Ltd., 1989 CanLII 129 (SCC), [1989] 1 S.C.R. 426, forecloses it in this case. In that case, the Court wrote that “[i]f one wishes to contract out of statutory protections this must be done by clear and direct language” (at 449‑450). While Hunter dealt with a contractual waiver of a broad statutory warranty over the sale of goods, in Boyce v. Co‑operators General insurance Co., 2013 ONCA 298 at para. 20, the Ontario Court of Appeal relied on Hunter for the principle that “a court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in ‘clear language’ describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods.”

Accordingly, while it may be possible to extend or reduce the basic limitation period in British Columbia, this question does not appear to be definitively answered.

Manitoba

The Limitation of Actions Act (Manitoba) is also silent as to whether the basic limitation period may be extended or reduced by agreement. Similarly, the issue does not appear to have been answered at common law in Manitoba.

The issue was touched on by the Manitoba Law Reform when it released Commission Report #123 on Limitations in July 2010. Included in this report was a recommendation that “parties should be permitted to agree to lengthen, but not to shorten, limitations” (pp. 50-51 and 117). The report went on to suggest adding the following language to The Limitation of Actions Act (Manitoba):

Agreements

(1) A limitation under this Act may be extended, but not shortened, by agreement.

(2) Subsection (1) does not affect an agreement made before the day this Act comes into force.

However, this recommendation has not been implemented.

Accordingly, while it may be possible to extend or reduce the basic limitation period in Manitoba, this question does not appear to be definitively answered.

Ontario

Section 22(3) of the Limitations Act, 2002 (Ontario) provides that the basic limitation period may be suspended or extended by agreement.

Section 22(5) further provides that a business agreement may vary or exclude a basic limitation period, where “business agreement” is defined to mean an agreement where neither party is a consumer (within the meaning of applicable consumer protection legislation).

Accordingly, parties to a commercial contract may agree to suspend, extend, vary or exclude a basic limitation period in Ontario.

Saskatchewan

Section 21(1) of The Limitations Act (Saskatchewan) provides that an agreement may extend a basic limitation period.

However, The Limitations Act (Saskatchewan) is silent as to whether a basic limitation period may be reduced by agreement. Further, the issue does not appear to have been decided at common law in Saskatchewan in the context of commercial contracts. While the Court of Queen’s Bench for Saskatchewan decided in Seaman v. Saskatchewan Mutual Insurance Company, 2015 SKQB 197, that a limitation period under The Saskatchewan Insurance Act could not be reduced, it is still a point of uncertainty whether a basic limitation period can be reduced in a commercial contract.

Conclusion

As a general rule, a basic limitation period may be extended by agreement in Alberta, Ontario and Saskatchewan; however, the law on this does not appear to be settled in British Columbia or Manitoba. Meanwhile, a basic limitation period can be reduced by way of a commercial agreement in Ontario, but cannot be reduced by agreement in Alberta. The law on this is similarly unsettled in British Columbia, Manitoba and Saskatchewan.

Beyond these general rules, the enforceability of any agreement that purports to extend or reduce a limitation period may depend on certain factors, including the nature and wording of the agreement itself. We recommend obtaining legal advice before entering into any contract that attempts to extend or reduce a limitation period. Should you have any questions about extending or reducing limitation periods in a commercial contract, we would be pleased to assist you.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.