We frequently assist clients with:

• Unpaid invoices for goods or services;

• Failure to deliver goods or complete contracted work;

• Defective, incomplete, or deficient services;

• Disputes involving loans and repayment agreements;

• Failure to honour warranties or guarantees;

• Wrongful termination or cancellation of contracts;

• Disputes concerning deposits, refunds, and cancellation fees;

• Misrepresentation concerning goods or services;

• Disputes over ambiguous or conflicting contractual terms;

• Breaches of confidentiality or other contractual obligations;

• Construction and renovation disputes;

• Motor vehicle purchase and repair disputes;

• Commercial and residential service agreements; and

• Claims involving independent contractors, consultants, and small businesses.

A claim may generally be brought in the Ontario Small Claims Court where:

• The plaintiff seeks no more than $50,000, excluding interest and costs;

• The claim seeks payment of money or the return of personal property;

• The defendant resides or carries on business in Ontario, or the events giving rise to the dispute occurred in Ontario; and

• The claim is commenced within the applicable limitation period.

Under the Limitations Act, 2002, most contractual claims must be commenced within two years from the date the claimant discovered, or reasonably ought to have discovered, that a legal proceeding was an appropriate means of pursuing the claim.

A demand letter is not always legally required before commencing an action. However, a clear written demand may provide an opportunity to resolve the dispute, confirm the amount claimed, establish a payment deadline, and document the other party’s position.

A legally enforceable contract generally requires:

• An offer;

• Acceptance of that offer;

• Consideration, meaning something of value exchanged between the parties;

• An intention to create legal relations; and

• Terms that are sufficiently certain to be enforced.

A contract does not always need to be a formally signed document. Depending on the circumstances, an enforceable agreement may be established through emails, text messages, quotations, invoices, purchase orders, oral discussions, the parties’ conduct, or a combination of these forms of evidence.

A contract or particular contractual term may be unenforceable where issues such as incapacity, mistake, misrepresentation, duress, unconscionability, illegality, or non-compliance with statutory requirements are established.

A claimant will generally need to establish that:

1. A binding contract existed between the parties;

2. The claimant performed their obligations or was ready and willing to do so;

3. The defendant failed to perform a contractual obligation;

4. The claimant suffered a loss as a result; and

5. The amount of the loss can be proven with reliable evidence.

The party bringing the claim bears the burden of proving the case on a balance of probabilities. Clear documentation and credible witness evidence are therefore essential.

The Small Claims Court primarily awards monetary compensation. Depending on the circumstances, the following damages may be available.

1. Expectation Damages:

Expectation damages are intended to place the innocent party, as nearly as money can, in the position they would have occupied if the contract had been properly performed.

For example, if a supplier fails to deliver goods at the agreed price, the purchaser may claim the reasonable additional cost of obtaining replacement goods.

2. Reliance Damages:

Where anticipated profits are uncertain, a claimant may seek reasonable expenses incurred in reliance on the agreement, provided those expenses were wasted because of the breach.

3. Restitution and Return of Payments:

A claimant may seek the return of a deposit, advance payment, or other benefit provided to the defendant where the contractual basis for retaining that benefit has failed.

4. Consequential Damages:

Losses arising indirectly from a breach may be recoverable if they were reasonably foreseeable when the contract was made and can be proven with sufficient certainty. Examples may include reasonable replacement costs, additional expenses, or lost income caused by the breach.

5. Mental Distress and Loss of Enjoyment:

Damages for mental distress or loss of enjoyment are exceptional in contractual cases. They may be available where the nature or purpose of the contract was to provide peace of mind or a psychological benefit, and the resulting harm was reasonably contemplated by the parties.

6. Punitive Damages:

Punitive damages are awarded only in exceptional circumstances involving conduct that is malicious, oppressive, high-handed, or otherwise deserving of punishment. An ordinary breach of contract, even if deliberate, will not generally justify punitive damages.

7. Liquidated Damages:

A contract may specify an amount payable if a particular breach occurs. Such a provision may be enforceable where it represents a reasonable pre-estimate of the anticipated loss. A clause intended primarily to punish the breaching party may be found to be an unenforceable penalty.

8. Interest and Costs:

A successful party may also seek:

• Contractual interest, where legally enforceable;

• Prejudgment and postjudgment interest under the Courts of Justice Act;

• Court filing fees;

• Reasonable service expenses; and

• A contribution toward legal representation, subject to the Small Claims Court’s authority and applicable limits.

Several legal principles may restrict the amount that can be recovered:

• Causation: The loss must have resulted from the breach.

• Remoteness: The loss must have been reasonably foreseeable when the agreement was made.

• Mitigation: The innocent party must take reasonable steps to reduce or avoid further loss.

• Certainty: Damages cannot be based on speculation and must be supported by reliable evidence.

• Double recovery: A claimant cannot recover more than once for the same loss or be placed in a better position than if the contract had been performed.

• Monetary jurisdiction: The Small Claims Court cannot award more than $50,000, excluding interest and costs.

The Small Claims Court generally cannot grant remedies such as specific performance or an injunction. If the principal relief sought is an order compelling someone to perform an agreement or refrain from particular conduct, a proceeding in the Superior Court of Justice may be required.

Depending on the dispute, relevant evidence may include:

• The contract or written agreement;

• Emails and text messages;

• Quotes, estimates, and purchase orders;

• Invoices and statements of account;

• Receipts and proof of payment;

• Photographs or videos;

• Work orders and inspection reports;

• Delivery records;

• Expert reports or repair estimates;

• Demand letters;

• Records of attempted resolution;

• Evidence of replacement costs or lost income; and

• Witnesses with direct knowledge of the agreement or breach.

A contractual dispute may proceed through the following stages:

1. Preparation, issuance, and service of the Plaintiff’s Claim;

2. Delivery of a Defence and any Defendant’s Claim;

3. Default proceedings if the defendant fails to defend;

4. A mandatory settlement conference;

5. Motions or procedural requests, where required;

6. Exchange and service of trial evidence;

7. Trial; and

8. Enforcement if the judgment is not paid voluntarily.

Many cases resolve through negotiation or at the settlement conference. Where settlement is not possible, the matter proceeds to trial before a deputy judge.

Obtaining judgment does not guarantee payment. If the judgment debtor does not pay voluntarily, enforcement options may include:

• Garnishment of wages, bank accounts, or accounts receivable;

• A writ of seizure and sale of land;

• A writ of seizure and sale of personal property; and

• An examination of the judgment debtor to obtain information about income, assets, bank accounts, and other property.

The appropriate enforcement method depends on the debtor’s employment, assets, financial circumstances, and whether other creditors have priority.