The Ontario Court of Appeal has reaffirmed that in cases where there is a continuing breach of contract the limitation period for bringing the lawsuit resets each day as the continuing breach continues to occur.
The ruling occurred in the context of a commercial leasing dispute. One of the clauses of the lease required the tenant to carry on its business on a continuous basis from the leased premises. Although the tenant continued to pay rent, it failed to operate from the leased premises as required by the lease. The landlord sued the tenant after the end of the lease for a variety of reasons. At issue on appeal was whether the landlord’s claims as they related to the failure to operate from the leased premises were out of time pursuant to the Limitations Act, 2002.
The Court of Appeal set out the three types of breaches to a contract: the “once and for all” breach, the failure to perform a periodic obligation and the breach of a continuing obligation.
The tenant attempted to argue that each day that it failed to carry on business was not a new breach of the lease, but was rather a continuation of the previous breach. The tenant argued that once two years passed from the date of the initial breach, the landlord was out of time to bring its claim.
The Court of Appeal rejected this argument and held that where a breach consists of a failure to act it may be held to continue die in diem until the obligation is performed, or becomes impossible of performance or until the innocent party elects to treat the continued non-performance as repudiation of the contract.
As such, the Court of Appeal held that the claim was not brought out of time, due to the continuous nature of the breach.