Can a purchase agreement change the limitation period for claims?

A purchase agreement can change the deadline for suing in some provinces and not in others, so the governing law matters before the wording does. A limitation period is a statutory time limit for starting a court proceeding; under section 4 of Ontario’s Limitations Act, 2002, unless the Act provides otherwise, the basic period is two years from the day the claim was discovered. The question for a buyer is whether a clause can lengthen, shorten or remove that statutory clock.

Ontario: a general bar with exceptions

Section 22 of Ontario’s Limitations Act, 2002 says a limitation period under the Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections 22(2) to (6). One exception lets a period be suspended or extended by an agreement made on or after October 19, 2006, but the 15-year period in section 15 only if the claim has been discovered. Another applies only to a business agreement, meaning one made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002. For a business agreement made on or after that date, a period other than the section 15 period may be varied or excluded, and the section 15 period may be varied but suspended or extended only as just described. The Act defines “vary” to include extend, shorten and suspend.

Alberta: extending is allowed, reducing is not

Alberta’s Limitations Act says that if an agreement expressly provides for extending a limitation period, the period is altered in accordance with the agreement, subject to section 9. An agreement that purports to provide for reducing a period is not valid. Section 9 adds that an agreement must be in writing and signed by the person adversely affected, so an extension needs to be written and signed.

Québec and British Columbia

Québec’s Civil Code says no prescriptive period other than the one provided by law may be agreed upon, so the parties cannot set their own. Section 24 of British Columbia’s Limitation Act deals with acknowledgements of liability: if a person acknowledges liability before either of the limitation periods that apply to a claim expires, the claim must not be considered discovered earlier than the day of the acknowledgement. Apart from part payments and the other cases in subsections 24(7) to (9), an acknowledgement counts only if it is in writing, signed, and made by the person or their agent to the person with the claim or their agent, or to an official receiver or trustee under the Bankruptcy and Insolvency Act. Other provinces have their own Acts.

A contract deadline is a separate question

An agreement can also set its own deadline for notifying a claim after closing, the survival period. How that deadline sits alongside the statutory periods above depends on the wording and the governing law, so put the exact clause in front of your lawyer. The time limit to sue for misrepresentation explains how the basic periods are counted.