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CMB MAGAZINE cmba-achc.ca summer 2018 | 43
the recent case of Rosas v. Toca, 2018 BCCA 191
(CanLII) has changed the law in B.C. to the latter. It
remains to be seen whether other provinces will
follow the change and whether the change will
be applied to not only loan arrangements but to
contracts generally.
whAt hAppeNed? The lender had won a lottery
and loaned $600,000 to her friend to help her and
her husband purchase a home. The loan was to
be repaid, without interest, in one year's time.
Approximately one year after the loan was
formed, the borrower told the lender, "I will pay you
next year." The lender agreed to the extension on
payment and did not commence a lawsuit.
The making of the request for and the granting
of the extension was repeated for several years,
but the loan was never repaid. No payments were
made and nothing of value was provided to the
lender for extending the time for repayment.
After six years and seven months had lapsed,
the lender sued. Was the lender seven months
too late to enforce the debt, the limitation period
at the time in B.C. being six years? Would the
court order the borrower to pay the debt?
deciSioN The law, with exceptions, has been
that a promise is enforceable only if consideration
(something of value) is provided for the promise.
In this case, the friend was already obligated
to pay the debt and paid nothing for the lender's
promise to extend the due date for the debt. In
the past, because nothing additional was paid,
the lender's promise to not enforce the breach
for another year was only voluntary and would
not be enforceable. Because the promise of the
extension was not enforceable, the limitation
period would have started when the initial
enforceable promise was breached—that is when
payment was due but not paid at the end of the
first year. This would have meant the lender was
out of time to enforce the debt.
The B.C. Court of Appeal said the law
surrounding context modifications had evolved.
After reviewing the evolution, including in other
nations, the court concluded:
When parties to a contract agree to vary
its terms, the variation should be enforceable
without fresh consideration, absent duress,
unconscionability or other public policy concerns,
which would render an otherwise valid term
unenforceable. … In this way the legitimate
expectations of the parties can be protected.
To do otherwise would be to let the doctrine of
consideration work an injustice.
The limitation period was accordingly to be
calculated from the breach of the extension and
so the lender was not out of time. The court,
making new law, enforced the lender's debt.
tAKeAwAyS Gratuitous contract extensions
can be enforced in some circumstances. Duress,
unconscionability or other public policy concerns
can make otherwise enforceable gratuitous
contract extensions unenforceable.
It will be interesting to see whether the courts
of other provinces will follow this approach and
whether it will be applied in areas other than
mortgage (for example, an employer's changing
working conditions). Limitations vary across the
provinces, subject areas and time; the principles
of the case can apply regardless.
n
