Credit Laws
In this section:
- Your Customer Claims That He Does Not Speak or Read English – Can You Still Enforce the Contract?
- How Long Is A Debt Good For?
Your Customer Claims That He Does Not Speak or Read English – Can You Still Enforce the Contract?
By Craig A. Lewis, B.A., LL.B.
Your customer has defaulted on a contract and claims that he did not understand the contract because he does not read English (or French) at all. In effect, he is saying “I did not understand what I signed”. This is the legal defence known as non est factum (Non est factum is a Latin phrase that is translated to mean “it is not my form”). It raises the following questions: 1) what does a court do in these circumstances? and 2) what can you, as creditor, do to protect your rights of enforcement.
The multicultural nature of Canadian society is beyond question. More than five million Canadians have a first language which is neither English nor French. Due to a high immigration rate, the issue is only going to become more prevalent in the future. Most creditors draft their contracts in one or the other of the official languages of Canada: English or French. Many contracts contain a statement to the effect that, “The parties agree that this document be written in the English language.” This statement is also usually repeated in French. English and French are the customary languages for creditors to produce contracts.
With respect to a claim by a customer that he does not speak, read or write English well, much or at all, it should be noted that as a general rule, the mere fact of one’s inability to read English or is insufficient to allow a non est factum defence to be accepted by a court. The defence is, in essence that the person is “illiterate” because of their failure to be able to read English. There must also be additional factors related to the sophistication of the customer, mental disability and other legal defences like duress, unconscionability, mistake, undue influence, lack of capacity, misrepresentation and inequality of bargaining power. The basic rule of law is that the signor of a document is bound by its terms. Commercial certainty of transactions requires that an innocent party be able to rely on the signature.
However, in rare situations, the court will protect an unsophisticated individual who can establish on a balance of probabilities that he/she could not read the contract, did not understand the terms and obligations contained therein and was sufficiently unsophisticated that he/she should not be bound by its terms. It is an extremely high onus to meet. Even though someone may not be able to read English, they may be sophisticated in another language and may have business experience in another language or may have signed similar contracts in the past (albeit in a different language).
While in certain circumstances a person will be allowed to void a contract where they are unsophisticated, illiterate and incapable of understanding the consequences of the legal contract, the Supreme Court of Canada has effectively put the onus on the individual who is careless when signing a document. In Marvco Color Research Ltd. v. Harris, the Supreme Court of Canada held that the defence of non est factum is unavailable if an individual is careless when signing the document. The defence of “non est factum cannot be available to anyone who was content to sign without taking the trouble to find out at least the general effect of the document”.
Canadian courts have been reluctant to permit a person who is not suffering from a disability (e.g. blindness or other physical impairment) to rely on the non est factum defence. In deciding these cases, the courts are going to focus their attention on the sophistication of the person and the level of care that he or she took prior to signing the contract.
As a preventative measure, it is recommended that where a customer does not read English and wishes to have the document explained to him, the prudent creditor will suggest that the person have it read to him in his native language by a person he trusts. If this is done, it should be recorded on the document itself that it was read to him by the person (whose full legal name should be recorded thereon). This accomplishes two things, 1) it will show that the person is not careless and 2) it will also preclude the person from raising the non est factum defence unless he could show that the explanation was incorrect in some fundamental way.
It should also be noted that if the illiterate party fails to disclose the illiteracy it may be held against the illiterate signor. This could be considered further carelessness. Thus where the customer does advise of his illiteracy, it is strongly recommended that the document be explained to him in his native language.
In summary, while this defence will continue to be raised by customers, it is unlikely that a customer will be successful in establishing the defence of non est factum without showing some other legal reason for being excused from performance.
Craig Lewis is a partner in the firm of Willson Lewis LLP, a litigation law firm practising in civil litigation, employment law, construction, commercial disputes, family law, tax disputes, aviation and equine law. You may contact him at: www.willsonlewis.com, (416) 534-9504 or toll free (866) 258-2848
How Long Is A Debt Good For?
By Blair Wettlaufer
Many questions often arise about the age of a debt, and what can be done, especially when it comes to bad debt write-off, collections, the credit bureau, or legal action. Each Province has its own statute of limitation on legal action, or the enforcement period allowed on a judgment acquired.
Furthermore, a second limitation period is set in each province for reporting to the credit bureau, and this is also covered under various provincial statutes.
Legal Limitations
Each province has it’s own limitation statute on legal action, allowing a certain period of time from the incurring of the debt (or knowledge that the debt has become delinquent) to the actual filing of a statement of claim in either small claims or general court for compensation.
The chart below shows the limitation period allowed by each province, the name of each provincial act that lays down the specifics of limitation on legal action.
Province/Territory |
General |
Judgment |
Statute(s) |
Notes |
British Columbia |
2 years |
10 years |
Limitation Act [RSBC 1996] Chapter 266 |
-- |
Alberta |
2 years |
10 years |
Alberta’s Limitations Act (Revised Statutes of Alberta 2000, Chapter L-12) |
Limitation Period is suspended if the creditor is under a period of disability. |
Saskatchewan |
2 years |
10 years |
Limitations Act |
Ultimate limitation period of 15 years (regardless of payments, a period of disability, etc) |
Manitoba |
6 years |
10 years |
Limitation of Actions Act of Manitoba, CCSM c.L150 |
Ultimate limitation period of 30 years (regardless of payments, a period of disability, etc) |
Ontario |
2 years |
Indefinite |
Limitations Act, 2002 |
Ultimate limitation period of 15 years on non-judgment debts, refers to other Acts with their own limitation period. |
Quebec |
10 years |
10 years |
Civil Code of Quebec (articles 2875-2933) |
In Quebec, limitations are defined as presecriptions. This is a highly complex set of laws, and diligence should be exercised. |
Newfoundland |
6 years |
10 years |
Limitations Act |
A limitation of 2 years on damages to a person or property resulting in an economic loss. |
New Brunswick |
2 years |
20 years |
Limtation of Actions Act, RSNB 1973 |
This act has highly variable limitations based on circumstances. |
Nova Scotia |
6 years |
20 years |
Limitations of Actions Act, RSNS 1989 |
Debts under Nova Scotia law are highly variable in limitation – acknowledgement of a debt can extend the limitation to 20 years. |
Prince Edward Island |
6 years |
10 years |
Statute of Limitations Act, RSPEI 1988 |
-- |
Yukon |
6 years |
10 years |
Limitation Act |
Limitation Period is suspended if the creditor is under a period of disability, and then for a further 2 years. |
Northwest Territories |
6 years |
10 years |
Limitation of Actions Act, NSNWT 1988 |
-- |
Nunuavut |
6 years |
10 years |
Limitation of Actions Act, NSNWT 1988 |
-- |
In most provinces, acknowledgement of a debt in writing resets the limitation period to that date. In several provinces, addressing the debt in writing, even in dispute, can be counted as an acknowledgement.
Please note that this is a very simplified overview of these acts, and there are often a number of variations or exceptions to the limitation period when dealing with real property, debts involving collateral, student loans, family law, debts from government fines or fees, and such. Please consult the actual statute relevant to each province for a full description of each province’s limitations.
Credit Reporting
Notwithstanding legal action, there are separate limitations enforced by provincial law on what can be reported to the credit bureau. In Canada, the credit bureau is a simplified term for a company registered under a consumer reporting act – the companies of significance that hold this data are Trans Union Services and Equifax. Both of these companies are obliged to follow the provincial statutes relevant to the consumer, where relevant laws exist – these statutes dictate what may be recorded on a credit report, whom the information may be disclosed to, the method to handle disputes or validation requests, and for what period the information may be retained.
Province/Territory |
Consumer |
Statute(s) |
Notes |
British Columbia |
6 years |
Limitation Act [RSBC 1996] Chapter 266 |
-- |
Alberta |
6 years |
Fair Trading Act |
Judgments can only be listed for 6 years unless confirmed by the creditor. |
Saskatchewan |
6 years |
Credit Reporting Act |
-- |
Manitoba |
6 years |
Personal Investigations Act |
-- |
Ontario |
7 years |
Consumer Reporting Act |
-- |
Quebec |
(not specified) |
Loi sur la protection des renseignements personnels dans le secteur privé |
While the Quebec statute outlines the regulations for consumer reporting agencies, it does not outline a limitation period. Both Trans Union and Equifax observe a 6 year period for debts (and Trans Union observes a 7 year period for judgments). |
Newfoundland |
6 years |
Consumer Protection and Business Practices Act |
Judgments can only be listed for 7 years |
New Brunswick |
(not specified) |
(no laws) |
While there are no provincial laws for consumer reporting, both Trans Union and Equifax observe a 6 year period for debts (and Trans Union observes a 7 year period for judgments). |
Nova Scotia |
6 years |
The Consumer Reporting Act |
The provincial act lays out a limitation of 6 years for judgments, and 7 years for bankruptcies, but does not address non-judgment debts. Both Trans Union and Equifax observe a 6 year period for debts. |
Prince Edward Island |
7 years |
Consumer Reporting Act |
Judgments are allowed to be listed for 10 years as per the act. |
Yukon |
(not specified) |
(no laws) |
While there are no provincial laws for consumer reporting, both Trans Union and Equifax observe a 6 year period for debts (and Trans Union observes a 7 year period for judgments). |
Northwest Territories |
(not specified) |
(no laws) |
While there are no provincial laws for consumer reporting, both Trans Union and Equifax observe a 6 year period for debts (and Trans Union observes a 7 year period for judgments). |
Nunavut |
(not specified) |
(no laws) |
While there are no provincial laws for consumer reporting, both Trans Union and Equifax observe a 6 year period for debts (and Trans Union observes a 7 year period for judgments). |
The reporting period is also reset by a partial payment on account, or in some provinces the acknowledgment of the debt itself.
While the various provinces allow for various terms of debt to be listed on the credit bureau, Trans Union and Equifax have been known to vary from the provincial requirements by listing debts for a shorter period, or assigning a limitation period where none exists in law. For a summary of the policies of Equifax and Trans Union in their listings of Trade Items, Judgments, Collections, Secured Loans, Registered Consumer Proposals, Credit Counseling, and Bankruptcies by province, please consult the Financial Consumer Agency of Canada’s publication, Understanding Your Credit Report and Credit Score.
Bad Debt Write Off
When a company writes off accounts receivable amounts, it has no impact on whether it can be pursued or not. Many small businesses often think it prevents them from collecting the account in the future, which is false – there is merely some bookkeeping to be done to account for the loss, and later recovery. If a debt has been written off, it is simply no longer counted on the balance sheet of the company as income. Should the funds be later recovered, it can be added in another income category.
Conclusion
Limitations are inevitable, no matter what province you are in. All creditors should have a plan on how to address their debts in a timely manner. Our office recently had a client list a file with our firm for legal action, with only two weeks remaining to file a claim – understandably, much scrambling was necessary. Plan ahead, and decide a reasonable time line for enforcing your receivables.
If you have additional questions, email me directly if I can be of further assistance.
Blair Wettlaufer
Kingston Data and Credit
Cambridge, Ontario
226-444-5695
bwettlaufer@kingstondc.com
