Introduction
You entered into a business agreement in good faith. You performed your obligations. And now the other party has failed to deliver on theirs. Maybe they missed a critical deadline, failed to pay what they owe, delivered substandard work, or violated a key contractual term. Whatever the specifics, you are dealing with a breach of contract — and you need to understand your options.
Ontario law provides several remedies for breach of contract, ranging from monetary damages to court-ordered performance. However, the right approach depends on the nature of the breach, the terms of your agreement, and the practical realities of your business situation. This article walks you through how to identify a breach, the remedies available under Ontario law, and the practical steps you should take to protect your interests.
Identifying a Breach: Material vs. Minor
Not all breaches are created equal. Ontario law distinguishes between material breaches and minor breaches, and the distinction matters because it affects your available remedies.
A material breach (sometimes called a fundamental breach) is one that goes to the root of the contract — it deprives the innocent party of substantially the whole benefit they were entitled to receive under the agreement. A material breach gives the innocent party the right to treat the contract as terminated and to claim damages.
A minor breach (sometimes called a partial breach) is one that does not go to the root of the contract. The innocent party is entitled to claim damages for the breach, but they cannot treat the contract as terminated. They must continue to perform their own obligations and seek compensation for the loss caused by the breach.
Whether a breach is material or minor depends on the specific facts, the terms of the contract, and the impact on the innocent party. If your contract defines what constitutes a material breach — and well-drafted commercial agreements often do — that definition will generally govern.
Remedies for Breach of Contract in Ontario
Ontario law provides several categories of remedies for breach of contract. The appropriate remedy depends on the nature of the breach, the type of loss suffered, and the terms of the agreement.
Expectation Damages
The most common remedy for breach of contract is expectation damages, also known as "benefit of the bargain" damages. The purpose of expectation damages is to put the innocent party in the position they would have been in had the contract been performed as agreed. This includes the value of the promised performance, minus any costs that the innocent party would have incurred in receiving that performance.
Reliance Damages
Where expectation damages are difficult to calculate — for example, because the lost profits are too speculative — the innocent party may seek reliance damages instead. Reliance damages compensate the innocent party for expenditures made in reliance on the contract. The goal is to put the innocent party back in the position they were in before the contract was made.
Specific Performance
In some cases, monetary damages are not an adequate remedy. Specific performance is a court order requiring the breaching party to perform their contractual obligations. Ontario courts grant specific performance when the subject matter of the contract is unique and damages would not adequately compensate the innocent party. Contracts involving real property are the most common context for specific performance, but it may also be available in other situations involving unique goods or obligations.
Injunction
An injunction is a court order that restrains a party from doing something — for example, breaching a non-solicitation covenant or misusing confidential information. Injunctions are equitable remedies and are granted at the court’s discretion. To obtain an injunction, the applicant typically must demonstrate that damages would be an inadequate remedy and that the balance of convenience favours granting the order.
Accounting of Profits
In limited circumstances, the innocent party may seek an accounting of profits — a remedy that requires the breaching party to disgorge the profits earned as a result of the breach. This remedy is less common in straightforward breach of contract cases but may be available where the breach involved a fiduciary relationship or where the breaching party profited directly from the breach at the innocent party’s expense.
The Duty to Mitigate
Ontario law imposes a duty on the innocent party to take reasonable steps to mitigate — that is, to minimize — the losses resulting from the breach. You cannot sit back and allow your losses to accumulate if there are reasonable steps you could take to reduce them.
For example, if a supplier fails to deliver goods, the innocent party may be required to source replacement goods from another supplier, even if doing so is inconvenient or slightly more expensive. The cost of mitigation is itself recoverable as damages, but losses that could have been avoided through reasonable mitigation efforts are not.
Failing to mitigate does not eliminate your claim, but it may significantly reduce the damages you can recover.
Limitation Periods: Act Promptly
Under Ontario’s Limitations Act, 2002, the basic limitation period for breach of contract claims is two years from the date the claim was discovered or ought to have been discovered. There is also an ultimate limitation period of 15 years from the date the act or omission giving rise to the claim occurred.
The two-year basic period is critical. If you do not commence legal proceedings within two years of discovering the breach, your claim may be statute-barred — meaning you lose the right to bring it, regardless of its merits. This makes it essential to seek legal advice promptly when you become aware of a breach.
Practical Steps After a Breach
When you discover that the other party has breached your agreement, the following steps will help protect your position:
1. Document everything. Preserve all communications, records, invoices, and evidence related to the breach. Note dates, amounts, and the specific contractual obligations that were not met.
2. Review your contract carefully. Check the dispute resolution clause — many commercial agreements require mediation or arbitration before litigation. Review the notice provisions, termination rights, and any cure periods that may apply.
3. Send a formal demand letter. A written demand that identifies the breach, specifies the remedy sought, and sets a deadline for response is often the first step toward resolution. The demand letter also creates a record of your efforts to resolve the dispute.
4. Attempt negotiation or mediation. Many commercial disputes can be resolved through direct negotiation or structured mediation without the cost and delay of litigation. Courts in Ontario increasingly expect parties to have attempted alternative dispute resolution before proceeding to trial.
5. Consider arbitration. If your contract contains an arbitration clause, you may be required to resolve the dispute through arbitration rather than court proceedings. Arbitration can be faster and more private than litigation, though it has its own costs and limitations.
6. Commence litigation if necessary. If negotiation, mediation, and arbitration do not resolve the dispute, you may need to commence legal proceedings. Remember the two-year limitation period under the Limitations Act, 2002 — do not delay to the point where your claim becomes statute-barred.
When to Involve a Lawyer
You should involve a lawyer as early as possible after discovering a breach. A lawyer can help you assess the strength of your claim, determine the best strategy for resolution, ensure you meet all contractual and statutory deadlines, and protect your position throughout the process. Early legal advice often saves time and money by steering you toward the most effective resolution path. The team at Booni Law is well equipped to service such needs.
Frequently Asked Questions
Q: What is the time limit for suing for breach of contract in Ontario?
A: Under the Limitations Act, 2002, the basic limitation period is two years from the date the claim was discovered or ought to have been discovered. There is also an ultimate limitation period of 15 years. You should seek legal advice promptly to ensure your claim is not statute-barred.
Q: Can I terminate the contract because of the breach?
A: You can terminate if the breach is material — meaning it goes to the root of the contract and deprives you of substantially the whole benefit you were entitled to receive. If the breach is minor, you can claim damages but generally cannot terminate. Review your contract for any termination provisions that apply.
Q: Do I have to try to settle before I can sue?
A: It depends on your contract. Many commercial agreements require mediation or arbitration before litigation. Even if your contract does not require it, Ontario courts expect parties to have made reasonable efforts to resolve disputes before proceeding to trial. Attempting settlement is generally good practice and can save significant time and cost.
Q: What if the breach caused me to lose a business opportunity?
A: Lost business opportunities may be recoverable as damages if you can demonstrate that the loss was a reasonably foreseeable consequence of the breach and that you can quantify the loss with reasonable certainty. Speculative or overly remote losses are generally not recoverable. A lawyer can help you assess whether your lost opportunity claim is viable.
Contact Booni Law
If your business partner or counterparty has breached a commercial agreement, Booni Law can help you understand your rights, evaluate your remedies, and pursue the most effective resolution strategy. We represent Ontario businesses in breach of contract disputes at every stage — from demand letters and negotiation through mediation, arbitration, and litigation.
Booni Law serves clients across Ontario, including the Greater Toronto Area, Southwestern Ontario, and communities throughout the province. Email us at admin@boonilaw.com or call +1 (226) 271-1751 to get started.
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Reading this article does not create a solicitor-client relationship between you and Booni Law. The information in this article may not reflect the most current legal developments and should not be relied upon as a substitute for professional legal advice tailored to your specific circumstances. If you require legal advice, please contact Booni Law.
