Construction Law - Arbitration - Negotiations - Limitation Periods - Contracts

An arbitration clause in a construction contract may be written in a way that encourages, and indeed requires, the parties to attempt to settle their differences by negotiation. But if the parties attempt to do so and fail, can one party say to the other: "Gotcha! The limitation period for your claim has now passed!" That is the issue which the Ontario Court of Appeal recently addressed in L-3 Communication Spar Aerospace Limited v. CAE Inc.

There are two lessons to be learned:

First, if you want to insert into an agreement an obligation to negotiate, then ensure that the agreement states that the limitation period only commences once the negotiations are complete.

Second, if you are in the midst of a dispute and the limitation period is looming, then initiate the claim and negotiate later, unless you are very certain that the limitation period is not running in the meantime.