The New Limitations Act - Its Impact Upon Demand Obligations

The new Ontario Limitations Act, 2002 (the "Act"), which came into effect in January 2004, reduces the limitation period for actions from six years to two years, subject only to specific exceptions. Consequently, a lawsuit must now be brought within two years from the date that the underlying "claim" was discovered or should have been discovered. Otherwise, the ability to pursue an action with respect to a claim will be statute barred if the claim is not made within the two year limitation period. A "claim" is defined under the new Act as "a claim to remedy an injury, loss or damage".

The reduction in the limitation period from six years to two years is of particular note with respect to demand loans. Courts have previously established that promissory notes that are payable on demand create an obligation to pay from the time that the promissory notes were entered into. Accordingly, the limitation period with respect to demand loans has