Legal Blog

Specialty

What’s a specialty? In order to satisfy the curiosity of readers everywhere, we are going to devote too much space to answer this question that has been burning in everyone’s minds. The corollary question, of course, is what relevance a specialty has. The Limitations Act raises the limitation period from 6 years for an ordinary contract to 20 years for a specialty. The very question arose in 872889 Ontario Inc. v. Iacovoni, (1998) 40 O.R. (3d) 715(C.A.).

Facts

A purchaser and vendor enter into a standard form agreement for the purchase and sale of a new home. Assume for the moment that the document is under seal. The deal does not close because of the fault of the vendor. The vendor goes broke and the assignee of the vendor’s assets takes over the rights that the vendor has against the purchaser.

The assignee sues in May 1996. The purchaser pleads that the action is invalid because the vendor’s corporate existence had lapsed. The vendor is revived in September 1996. The purchaser pleads that the 6 year limitation period expired in June 1996, before the revival, and that the action is therefore statute barred.

The case turned on the answer to the question: was the contract a specialty such that a 20 year limitation period applied or was the contract an ordinary contract such that a 6 year limitation period applied?

What’s a Specialty?

We thought you would never ask. A specialty is sometimes defined as a contract under seal. However, that is a necessary condition for a specialty, not a sufficient one. A specialty is actually an undertaking to pay, under seal. A seal does not transform a simple contract into a specialty. The contract must be a covenant that secures a debt. Accordingly, the Court held that an agreement for the purchase and sale of land is no more than a simple contract and the imposition of a seal does not, somehow, change it into a specialty. Conversely, a promissory note, if executed under seal, would be a specialty. Its very purpose is to secure payment of a debt.

What’s a seal?

The Iacovoni case hinged on two questions. Was the agreement a specialty if sealed and was the agreement sealed? Obviously, the plaintiff loses if either question is answered in the negative. We already know that the answer to the first question was no. The Court also answered the second question. Indeed, it was dealt with first in the reasons for decision.

The agreement had the usual words “signed, sealed and delivered”. It did not have the black dots after the signature lines or “LS” or, indeed, anything to indicate a seal was ever contemplated. There was no evidence of a corporate seal being affixed. The plaintiff argued that the magic words stated above meant that the document was under seal. The Court disagreed.

It summed up its reasons as follows: “The basic logic underlying the decision below is that the words ‘signed, sealed and delivered’ anticipate three events – signing, sealing and delivering. No one would suggest that an unsigned document was signed. Why then should a document which bears no trace of a seal be deemed to be sealed? In these circumstances, I agree with Laskin J.A. and Misener J. that the fiction should not be extended. I also agree with the judge below that, in the absence of any other evidence as to the intention of the purchasers, ‘mere recitals are not sufficient to create a contract under seal’.”

The plaintiff lost on both issues.