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Cyndee Todgham Cherniak

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Susan Kohn Ross

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Andrew Hudson



Don't Be Demanding if the Loan Does Not Have Specified Terms

David Debenham of Lang Michener LLP has provided the following brief summary of Animal House Investments Inc. v. Lisgar Development Ltd., 2008 CanLII 39607.  One of the relevant questions answered in this case is:
Is a loan made without specified terms a demand loan as a matter of law?

The answer appears to be that under Ontario law, a loan made without specified terms is not a demand loan.

The Court writes:

[15]      The applicant argues that numerous decisions compel the Court to conclude that the phrase “no specified terms of repayment”, and similar iterations, mean, as a matter of law, that the shareholder loan is payable on demand or within a reasonable period of time.  I do not agree.

[16]      This analysis skips a step.  The issue of contractual interpretation always involves a determination of the intention of the parties.  In the cases upon which the applicant relies, the courts did not impose an arbitrary rule in the manner he suggests.  Instead, they concluded that the intention of the parties was that the loans would be repayable on demand or within a reasonable time, given the particular circumstances of each case. 

[17]      Accordingly, the fact that the loan agreements are described in the financial statements and elsewhere as having “no specified terms of repayment” does not necessarily mean that the loans are payable on demand.

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