Ontario's 2-year clock: don't let the Limitations Act quietly kill your commercial claim

It is one of the most expensive mistakes we see in Ontario commercial recovery: a business waits, negotiates, waits some more — and by the time they call a lawyer, the two-year limitation period has already run out. The debt is real, the invoice is real, the evidence is solid. It just cannot be enforced anymore.

This post is a short, practical guide to the Ontario Limitations Act, 2002 — how the clock starts, what pauses it, and what to do if you think you may be running short.

The basic rule: two years from discovery

The Limitations Act, 2002 sets a general limitation period of two years, counted from the day the person with the claim first knew (or ought reasonably to have known) that they had a claim and that a court proceeding was an appropriate remedy. That day is called the day of discovery.

For a straightforward unpaid invoice on net-30 terms, the day of discovery is usually the day after payment was due and not received. From that day, you have two years to issue your claim.

Demand obligations: the 2015 fix

Historically, an ongoing account (like a shareholder loan or a running trade account with no fixed due date) could raise timing traps. Since the 2015 amendments, for a demand obligation the two-year clock starts the day after the first demand for payment is made. In practical terms: putting the demand in writing sets the clock — you cannot let a demand sit indefinitely and preserve your rights forever.

What resets or extends the clock

Two mechanisms are worth knowing:

• Acknowledgment of liability in writing (s. 13): if the debtor acknowledges the debt in writing before the limitation period expires, the clock generally restarts from the date of the acknowledgment.
• Part payment: a part payment on the debt, made before expiry, also restarts the clock in most commercial contexts.

This is why we always ask, in intake: is there an email from the debtor saying 'we owe it, we're working on it'? Is there a partial cheque in the last two years? Those little pieces of paper can be worth the entire claim.

Ultimate limitation — 15 years

Behind the two-year window there is also an ultimate limitation period of 15 years from the day the act or omission on which the claim is based took place, regardless of discovery. In commercial-collection files this rarely does the work — the two-year rule almost always bites first — but it is worth knowing for latent claims.

Practical implications for A/R management

• Track invoice due dates and calendar the two-year mark from that date.
• If a debtor asks for time, get the acknowledgment in writing — email is fine — and keep it in the file.
• Treat partial payments as a signal to document the balance in writing, not just as good news for cash flow.
• Do not let a formal demand letter sit unanswered for months without a next step: the demand itself, and the debtor's silence, can be probative — but the calendar keeps ticking.

If you are looking at an account and are not sure whether the clock has run, don't guess. A formal Ontario demand letter sent before the deadline can prompt an acknowledgment that resets the period — and if not, at least you have preserved the option of issuing a claim in time.

Bottom line

The Limitations Act is unforgiving but predictable. Two years, from discovery, subject to a few named resets. If you have a file that has been drifting for 18 months, it is not too late — but it is close. Get a legal opinion before it becomes a story about a debt that could have been collected.