We frequently assist clients with:

• Non-payment or late payment disputes involving goods, services, or loans.

• Failure to deliver or perform under sales or service agreements.

• Wrongful termination of contracts, including agency and employment agreements.

• Disputes over interpretation of contract terms, including ambiguous or conflicting clauses.

• Issues involving deposits, liquidated damages, or penalty clauses.

• Breach of confidentiality, non-compete, or restrictive covenants.

• Real estate and commercial lease disputes.

A contract is a legally binding agreement requiring:

• Offer and acceptance,

• Consideration (something of value exchanged), and

• Intention to create legal relations.

Contracts must also comply with any statutory formalities, and can be set aside if tainted by incapacity, mistake, misrepresentation, duress, unconscionability, or illegality.

When a party breaches a contract, the law typically provides monetary compensation as the primary remedy, though courts may also grant specific performance or injunctions in limited cases. The main types of damages include:

1. Expectation Damages

The most common remedy, expectation damages aim to put the innocent party in the position they would have been in had the contract been fully performed. Courts calculate these by assessing the market value versus contract price, or lost profits minus avoided expenses.

Example: If a supplier fails to deliver contracted goods, the purchaser may recover the difference between the contract price and the cost of replacement goods.

2. Reliance Damages

Where lost profits are uncertain or speculative, the plaintiff may recover expenses incurred in reliance on the contract, provided those costs were wasted as a direct result of the breach. These damages prevent unfair enrichment but do not place the plaintiff in a better position than if the contract had been performed.

3. Restitution Damages

Restitution may be awarded to prevent unjust enrichment of the breaching party, such as refunding a deposit or recovering benefits conferred where the contract was unprofitable or terminated prematurely.

4. Damages for Intangible Harms

Modern courts allow recovery for mental distress, loss of enjoyment, or reputational harm where such harm was within the parties’ contemplation—particularly in contracts involving peace of mind, such as disability insurance (see Fidler v. Sun Life Assurance Co., 2006 SCC 30).

5. Punitive Damages

Punitive damages are rare and only awarded where the defendant’s conduct is malicious, oppressive, or high-handed, amounting to an independent actionable wrong beyond mere breach (see Whiten v. Pilot Insurance Co., 2002 SCC 18).

6. Liquidated Damages

Contracts often include liquidated damages clauses—predetermined amounts payable upon breach. Courts will enforce such clauses if they represent a genuine pre-estimate of loss, but will not enforce penalty clauses that impose amounts “extravagant and unconscionable” compared to actual loss.

Limits on Recovery

Courts impose limits to ensure fairness and avoid overcompensation:

• Causation: Damages must result directly from the breach (the “but for” test).

• Remoteness: Only losses reasonably foreseeable at the time of contracting are recoverable (see Hadley v. Baxendale, [1854] EWHC J70).

• Mitigation: The innocent party must take reasonable steps to reduce their losses. Failure to mitigate can reduce or eliminate recoverable damages.

The timing of damages assessment varies by context. Generally, damages are valued as of the date of breach, though exceptions exist—for example, in real estate transactions where a buyer reasonably sought specific performance, damages may be assessed as of the date that claim fails (Semelhago v. Paramadevan, [1996] 2 S.C.R. 415).