The email arrived at 4:47 PM on a Thursday in late November, and the executive director of the community services agency read it twice before understanding what it meant. The general contractor's lawyer was proposing what seemed like a reasonable accommodation: rather than rushing to file a lawsuit over the building deficiencies that had emerged in the renovated facility, the parties would enter into a written agreement tolling the limitation period for an additional twelve months. This would give everyone time to investigate the problems properly, retain experts, and explore whether a settlement might be reached without litigation. The executive director brought the proposal to the board at its next meeting, and the volunteer directors — none of whom were lawyers, most of whom had experience in social services rather than construction or commercial disputes — agreed that this sounded sensible. Why spend money on lawyers when the parties could simply extend the deadline and try to work things out? The tolling agreement was signed. Twelve months passed. No settlement materialized. When the agency finally filed its lawsuit against the contractor, and the contractor in turn tried to bring in the subcontractor who had performed the deficient foundation work, everyone discovered that the private deal between the agency and the contractor had created a problem that no one had anticipated. The subcontractor's limitation period had expired while the agency and contractor were negotiating, and the agreement that had seemed so reasonable had fundamentally altered who would bear the ultimate risk of the building's failures.
This outcome — counterintuitive to many people encountering it for the first time — flows from a foundational principle of limitation period law that operates in multi-party disputes. When two parties agree between themselves to extend or suspend a limitation deadline, that agreement binds only those two parties. It does not affect the limitation periods running in favour of anyone else. The clock keeps ticking against every other potential defendant, every other potential third party, every other person who might be drawn into the litigation. The private deal exists in its own contractual universe, governing only the relationship between its signatories, while the statutory limitation regime continues to operate everywhere else. Understanding this principle is essential for anyone involved in complex disputes where multiple parties might bear responsibility for a single harm, because the consequences of overlooking it can be severe and irreversible.
The Alberta Limitations Act creates what lawyers sometimes call a "hard stop" on the ability to bring legal claims. Two years from the date a claimant knew or ought to have known about the injury and its connection to a potential defendant, the door closes. Ten years from the act or omission that caused the injury, regardless of whether anyone knew about it, the door closes again. These deadlines are not suggestions. They are jurisdictional boundaries that courts have no discretion to extend, no matter how sympathetic the circumstances or how clear the underlying liability might be. The legislature created these rules to balance competing interests: giving injured parties a reasonable opportunity to pursue their claims while also ensuring that potential defendants are not left indefinitely vulnerable to lawsuits based on events that grow increasingly difficult to reconstruct as memory fades and documents disappear.
The limitation period runs separately for each potential defendant. This is the piece that catches many people off guard. If a building deficiency might have been caused by the general contractor's negligence, the subcontractor's faulty workmanship, the engineer's design errors, and the manufacturer's defective materials, there are four separate limitation periods running simultaneously — each measured from when the claimant knew or ought to have known about the injury and that defendant's potential involvement. Each defendant has its own clock. Each clock started ticking at its own moment. Each clock will expire at its own time. And crucially, nothing that happens between the claimant and one defendant has any effect on the claimant's deadline to sue a different defendant.
This brings us to the concept of tolling agreements, also sometimes called standstill agreements or forbearance agreements. These are contracts between a potential claimant and a potential defendant in which the parties agree that the limitation period will be suspended or extended for a specified time. They serve legitimate purposes. They allow parties to investigate claims thoroughly before committing to litigation. They create space for settlement discussions that might be derailed by the pressure of an imminent deadline. They reduce costs by deferring the substantial expense of commencing an action until the parties have determined whether the dispute can be resolved another way. They are particularly common in construction disputes, where the technical complexity of the claims often requires expert investigation that cannot be completed quickly.
The problem is not with tolling agreements themselves. The problem is with the assumption — understandable but incorrect — that an agreement with one potential defendant somehow preserves the claimant's position against all potential defendants. It does not. It cannot. A contract requires offer, acceptance, and consideration between the parties who are bound by it. The subcontractor who was not a party to the tolling agreement between the agency and the contractor made no offer, gave no acceptance, received and provided no consideration. The subcontractor has no contractual obligation to refrain from pleading a limitation defence. The subcontractor's limitation period continued to run during every day that the agency and contractor were negotiating, investigating, and exchanging correspondence about a possible settlement. When that limitation period expired, the subcontractor acquired an absolute defence to any claim against it — a defence that cannot be taken away by any agreement to which the subcontractor was not a party.
Consider how this played out in the renovation scenario. The agency discovered water infiltration and structural problems in its facility. It raised these concerns with the general contractor. The contractor acknowledged that something was wrong but disputed responsibility, suggesting that the problems originated with the foundation work performed by a subcontractor. Litigation seemed likely. But neither the agency nor the contractor wanted to incur legal costs immediately, so they entered into a tolling agreement extending the limitation period between themselves by twelve months. During those twelve months, experts were retained, reports were prepared, and settlement discussions occurred. No resolution was reached. When the agency finally sued the contractor, it was within the extended deadline and the contractor could not rely on a limitation defence. But the contractor, facing a claim it might lose, wanted to shift responsibility to the subcontractor whose foundation work had allegedly caused the problems. The contractor served a third-party claim, seeking contribution and indemnity from the subcontractor. And here the contractor discovered a painful truth: the subcontractor's limitation period had expired while the contractor was negotiating with the agency.
The contractor's position was now deeply compromised. It was being sued by the agency on a claim that was not statute-barred. It could not pass that liability along to the subcontractor because its claim against the subcontractor was statute-barred. The tolling agreement that had seemed like a reasonable way to avoid rushing into litigation had created a gap — a window during which the contractor's exposure to the agency was preserved but the contractor's recourse against the subcontractor evaporated. The contractor argued that this outcome was unfair, that the subcontractor should not benefit from a limitation period that expired only because the contractor had been trying to resolve the dispute responsibly. Courts have consistently rejected such arguments. The limitation period is a statutory right that belongs to the defendant. It runs according to the statute, not according to what the claimant was doing during the relevant period. The fact that a claimant was engaged in good-faith negotiations does not toll the limitation period, does not provide a basis for equitable relief, does not create any exception to the hard deadlines that the legislation imposes.
The question of who bears this risk has a clear answer: the party who agreed to the tolling agreement bears it. The contractor made a choice. It chose to extend the deadline for the agency's claim against it. In making that choice, it should have recognized that its own clock against the subcontractor was continuing to run. It should have protected itself by either declining to extend the agency's deadline or ensuring that the subcontractor was also party to any tolling arrangement. It did neither. That failure rests with the contractor, not with the subcontractor who was simply an uninvolved beneficiary of time passing. From the subcontractor's perspective, it did nothing wrong by allowing its limitation period to expire naturally. It had no obligation to agree to a tolling arrangement with anyone. It had no obligation to remind the contractor that limitation periods were running. It simply waited, as defendants are entitled to do, while the statutory clock wound down.
This analysis applies with equal force when viewed from the agency's perspective. The agency, in agreeing to the tolling arrangement with the contractor, preserved its ability to sue the contractor but did nothing to preserve its ability to sue the subcontractor directly. If the agency had any direct claims against the subcontractor — and depending on the circumstances, it might have — those claims continued to be subject to the ordinary limitation period. A tolling agreement with the contractor did not toll the agency's deadline to sue the subcontractor. If the agency allowed that deadline to pass while it was negotiating with the contractor, the agency would have lost its direct recourse against the subcontractor in the same way the contractor lost its third-party recourse. The agency might have been left in a position where its only defendant was the contractor, even if the subcontractor bore primary responsibility for the defective work.
The nonprofit context adds practical complexity to this legal framework. Volunteer board members, even sophisticated ones, do not necessarily understand the intricacies of limitation period law. They are presented with a proposal that sounds reasonable — extend the deadline, save money, try to settle — and they approve it because it aligns with their general preference for cooperation over conflict. They are not thinking about downstream implications for third-party claims. They are not thinking about the separate limitation periods running against different potential defendants. They are not thinking about the difference between the person they are negotiating with and the person who actually caused the problem. The executive director who brings the proposal to the board may not fully understand these issues either. The result is decisions made without complete information, with consequences that only become apparent years later when a court dismisses a claim that everyone thought was preserved.
The documentation problems that plague many nonprofit organizations compound these difficulties. In the renovation scenario, the agency did not document the project well at the time. This means that when problems emerged years later, the agency faced uncertainty about basic facts: when did specific work occur, what instructions were given, what was the contractor told about what the subcontractor was doing. These uncertainties affect not just the merits of the claim but also the limitation period analysis. The limitation period begins to run when the claimant knew or ought to have known about the injury and its connection to a particular defendant. "Ought to have known" imports an objective standard — what would a reasonable person in the claimant's position have discovered through reasonable diligence? An organization that did not keep good records may have more difficulty establishing that it could not reasonably have discovered the problem earlier. It may also have more difficulty proving when it actually did discover the problem. These evidentiary challenges do not disappear simply because the organization signed a tolling agreement with one defendant.
The government funder in the scenario represents another layer of complexity. If the government contributed capital toward the renovation, it may have its own interest in seeing the deficient work remedied. It may have rights under funding agreements that allow it to recover money if the funded project fails to meet certain standards. It may have subrogation rights that allow it to step into the agency's shoes and pursue claims against responsible parties. It may have independent claims based on representations made to it about the quality of the work. All of these potential claims are subject to their own limitation periods, running independently of whatever arrangements the agency makes with the contractor. A tolling agreement between the agency and contractor does not bind the government funder, does not affect the government funder's limitation periods, does not change the government funder's rights or obligations in any way.
Understanding this fragmentation — the way that a single building failure can generate multiple separate claims, each with its own limitation period, each running independently — is essential for anyone involved in managing such disputes. The practical lesson is that tolling agreements must be approached with caution and with a clear understanding of their limitations. Before agreeing to extend a deadline with one defendant, a potential claimant must map out all the other potential defendants and third parties who might be relevant to the dispute. The claimant must assess when the limitation periods against those other parties will expire. The claimant must consider whether those periods will expire during the proposed tolling period. If they will, the claimant must either decline to enter into the tolling agreement, insist that the other parties be included in the agreement, or commence protective litigation to preserve claims against parties who will not agree to toll.
The same analysis applies to defendants who might have contribution and indemnity claims against third parties. Before agreeing to extend the limitation period for a claimant's claim, a defendant must consider its own potential claims against others. If the defendant may ultimately seek to shift liability to a subcontractor, supplier, or professional, the defendant must verify that its limitation period against those parties will not expire during the tolling period. If it will, the defendant must either decline to extend the claimant's deadline, bring the third parties into the tolling arrangement, or commence its own third-party proceedings before its clock runs out. The contractor in the renovation scenario failed to do this analysis and suffered the consequences. It agreed to give the agency more time, without protecting its own downstream position, and ended up holding a bag that it had no ability to pass to anyone else.
The nature of construction defects makes this analysis particularly treacherous. Unlike a car accident, where the injury occurs at a specific moment in time and the responsible parties are usually immediately apparent, construction defects often emerge gradually, manifest differently at different times, and implicate responsibility chains that are not obvious to the uninformed observer. Water infiltration that becomes visible in year three of a building's life might have been caused by foundation work in month two of construction, or by envelope work in month four, or by both, or by neither. The building owner looking at water stains on a wall does not necessarily know where in the construction sequence the problem originated. The owner must retain experts, conduct invasive investigations, and trace causation through a chain that might include the general contractor, multiple subcontractors, material suppliers, and design professionals. This takes time. And while the owner is doing this work, limitation periods are running against everyone in that chain — each at their own pace, each potentially expiring at their own moment.
The discoverability analysis under the Limitations Act adds another variable. The two-year limitation period runs from when the claimant knew or ought to have known, through reasonable diligence, that the injury had occurred, that it was caused by an act or omission, and that the act or omission was that of the defendant. This test has three components, and each must be satisfied as against each defendant separately. A claimant might know about the injury — water damage — without knowing what caused it. A claimant might know that the injury was caused by faulty foundation work without knowing that the foundation work was performed by a subcontractor rather than the general contractor. A claimant might know all of this but reasonably believe, based on the contractor's assurances, that the contractor will repair the deficiencies and no claim is necessary. When the limitation period starts to run depends on the facts of each case, and the analysis is different for each potential defendant in the chain.
This complexity creates risk for nonprofit organizations, which often lack the expertise and resources to navigate these questions without professional help. A board of volunteer directors, however well-intentioned, is not equipped to assess when limitation periods began to run against various potential defendants, which parties should be included in a tolling arrangement, what protective steps should be taken before agreeing to extend any deadline. These are questions for lawyers who specialize in construction litigation and limitation period law. Yet nonprofits often hesitate to incur legal costs, especially in the early stages of a dispute when the full extent of the problem may not be apparent. They try to manage the situation internally, relying on the executive director or a board member with some business experience, and by the time they engage counsel, limitation periods have expired and options have been foreclosed.
The risk created by private tolling agreements is real, significant, and often overlooked. Two parties can bind only themselves. Their agreement to extend or suspend a limitation period creates rights and obligations only between them. Every other clock keeps running. Every other limitation period inches toward expiration. Every other potential defendant moves closer to acquiring an absolute defence. The party who agrees to the extension assumes the risk that downstream claims will become statute-barred during the extension period. That party cannot later complain that the outcome is unfair, that the third party benefited from time that the extending parties thought they were merely pausing. Time does not pause. It continues, relentlessly, for everyone who is not party to the agreement that purports to stop it. Understanding this principle — internalizing it, building it into every decision about how to manage a complex dispute — is the only way to avoid the trap that caught the contractor in the renovation scenario and that catches parties in similar situations every day in jurisdictions across the country.