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Someone just breached our contract, now what?

Contracts are one of the most foundational pieces of our legal system. Two parties (they could be individuals, corporations, or even government entities) agree to do something for the other in exchange for something of value. What that something of value is can vary: In old English law it has been as small as a peppercorn, and today can also be multi-million dollars. 

Most importantly though, a contract is a promise. By signing a written agreement, you’re committing to do exactly what is spelled out in the terms of that agreement. Some parties merely agree verbally to enter into a contract.  However, for a contract to be properly enforceable and clear, it should always be in writing and certain types of contracts (i.e., the purchase and transfer of land) must be in writing to be legally valid.

So, what happens then when someone breaks their promise, either by refusing to deliver on what was agreed to, or refuses to provide that something of value? How can you force someone else to follow through on a contract, or to pay their fair share?

Our lawyers at Pavey Law regularly handle contract disputes and enforcement, and while there are countless different types of contracts for different types of situations, here are some of the basics on contracts and some ways in which we help our clients. 

Breach of contract

If someone has breached a contract, they have failed to perform on one of the terms of the contract – either one that’s expressly written, or one that’s implied. This can include failing to complete a job or service, failing to deliver on part of a job, or failing to ensure that whatever final product was delivered was in good working order.

There are different types of breach of contract, and each of them may have a different road to remedy the situation. An actual breach of contract occurs where a contract has already been breached, whereas an anticipatory breach of contract means that even before the contract is breached one party has already said that they cannot honour the agreement, either by their words or actions. 

A breach of contract can also occur with only part of an agreement and does not necessarily need to apply to the whole agreement. Ultimately, though, if parties have made a formal contract that is legally valid, and one party has breached the agreement, there must be some sort of legal remedy available to make things right.

So, what do those legal remedies usually look like?

Damages

The primary remedy in Canadian law for a breach of contract is damages. Damages usually come down to dollars and cents – in other words, what sort of money will it take to set things right again? It may not be a perfect restoration as though the contract had been performed completely, but it is meant to cover the losses from the lack of performance. 

In Ontario, claims of $35,000 or less can be handled by the Small Claims Court, which usually is able to provide an award with less formal procedure, although legal advice is always advisable for large amounts. For claims over $35,000, a remedy can be sought through commencing an action before the Superior Court, although throughout this process the parties will likely engage in negotiation and alternative dispute resolution ahead of any trial. 

While damages are usually intended to set things right, they do not often compensate for the aggravation or stress that a breach may have caused. In extreme cases of bad behaviour, courts can award aggravated or punitive damages above and beyond any amounts to remedy the breach, however these are uncommon, and only given out in the most extreme cases. 

Injunctions

Injunctions are a legal remedy to prevent or remedy a breach of contract by stopping one of the parties from doing something that is harmful to the other party. These are often used in emergency situations, as a sort of ‘last minute’ remedy, such as asking a court to order a halt in demolition of something, or in building of something, until the legal issues can be further resolved. 

Injunctions are uncommon because the legal threshold for a court issuing an injunction is incredibly high. A party seeking an injunction essentially needs to prove that they would be irreparably harmed if the injunction was not granted, which makes injunctions rare. They are more frequently used in other areas of law (i.e., intellectual property infringement), but less so in contractual disputes. 

Specific Performance

Specific performance is a unique situation where a court can force a party to complete their obligations under a contract. This happens in cases where damages are simply not enough to make the situation right, however a court can order specific performance along with damages in some situations. 

Specific performance can happen in contracts involving unique goods, such as custom-made or hard-to-find products, or real estate transactions. For example, if a seller decides to pull back on an agreement of purchase and sale on their home, a court can order specific performance to force that seller to go through with the transaction, alongside any damages for delaying or disrupting the sale. 

Final Thoughts

The above just scratches the surface of contract law, which can get very complex given the different nature of contracts. Real estate purchase and sale agreements are different from employment agreements, which are different from commercial contracts and shareholder agreements, etc. It takes an experienced legal team to understand the distinct nature of your contract, what the implications of a breach may be, and how to remedy them. 

We are here to help. Our legal team has decades of experience managing contractual disputes for client in the Cambridge, Kitchener, and Waterloo and surrounding regions. We regularly advise clients in breach of contract scenarios, and we would be happy to help you if someone has indeed broken your contract. Contact us today to set up a consultation.