Many people do not realize that if they are injured or wronged, they have a limited time to commence legal proceedings, and if they do not do so within the required limitation period, the person who injured or wronged them will be immune to their claim.
This short article addresses Alberta limitation periods with respect to collection of unpaid debts or accounts.
The Alberta Limitations Act provides that a person has (A) two years from the time they know or ought to know (a) an injury has occurred, (b) the injury was attributable to the conduct of the defendant, and (c) the injury, assuming liability on the part of the defendant, warrants bringing a proceeding; or, (B) 10 years to commence a proceeding. The relevant limitation period is whichever period expires first. Injury is defined quite broadly to mean personal injury, property damage, economic loss, non-performance of an obligation or breach of a duty, which essentially includes in general terms everything one might ever sue for.
The Limitations Act effectively means that if a person who has been injured does not start a lawsuit in time, he or she will not be able to obtain judgment if the person being sued raises the Limitations Act as a defense.
If you think you have a reason to sue someone, you should get legal advice immediately. Limitations law is complicated, and you do not want to risk missing the limitation period.
If a person fails to pay an invoice or debt when due, they fail to perform their obligation or breach their duty.
The limitation period with respect to invoices or debts generally commences when the debt or invoice becomes due but is unpaid, as this is when the injury occurs and a person that is owed money (the “creditor”) knows, or ought to know, that the debt has not been paid and proceedings are warranted. When payment is due may be a term of the oral or written agreement, or the invoice itself may say when payment is due. But where this is not very clear, it is safest to assume the invoice is due when provided. The effect of the Limitations Act is that a creditor who is owed money has two years from the time the debt or invoice is due and owing, to commence proceedings against the person who owes the money (the “debtor”) to collect it. Otherwise, if the debtor defends, the debtor will have a full defense.
The limitation period with respect to debts may be extended in three ways. The first is by partial payment towards the amount owing by or on the debtor’s behalf. Upon receipt of partial payment, the limitation period restarts. In many cases, this is simple. But if the creditor is owed money by the same debtor on account of different invoices or debts, or different work was invoiced at different times, there are potentially multiple limitation periods, so it should be made clear which debt or invoice the payment is towards.
The second way to extend the limitation period is to obtain a written acknowledgement of the amount due and owing, signed by the debtor. Verbal promises or assurances that payment is coming are not enough to extend the limitation period. This is very important. Creditors often want to give the benefit of the doubt to debtors, and want to believe the debtor is telling the truth. The debtor may intend to pay, but that does not mean it will happen.
The third is a standstill agreement where the creditor and debtor agree that the limitation period is paused for a set time or until certain conditions obtain. This would need to be in writing as well, and would likely include an acknowledgment of the debt and ongoing payments anyways.
A creditor should never let a debt go unpaid for anywhere even close to two years without taking steps to preserve the creditor’s rights.
There could be uncertainty as to when the limitation period started or expires. Or there may be other creditors of the debtor, and waiting while the other creditors do not could mean not getting paid. Further, starting a lawsuit does not necessarily mean proceeding with it right away. A creditor can always sue to preserve the creditor’s rights, and then agree to forbear or hold off on terms such as security for the debt, interest, or regular monthly payments.
Time passes surprisingly fast, and it is very easy to avoid thinking about stressful or uncomfortable matters.
If you are owed money, keep the limitations period in mind and seek legal assistance sooner, rather than later, to ensure your rights are preserved.
Legally Speaking appears every second week in LIFE. It is intended for information purposes only. Readers with a specific legal problem should consult a lawyer. This week’s column was written by James Cawsey, of the Red Deer law firm Duhamel Manning Feehan Warrender Glass. Cawsey can be reached at 343-0812 or at www.reddeeraltalaw.com