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A contract claim is won on documents and lost on mitigation. We assess what the agreement actually obliges each side to do, what the breach is provably worth, and whether the defendant can pay before you spend anything on a claim.
Book My Consultation →A breach of contract claim in Ontario is subject to the two-year basic limitation period in section 4 of the Limitations Act, 2002, running from the day the breach was discovered under section 5.
Yes, if you can prove a contract existed, what its terms were, that the other party failed to perform an obligation, and that the failure caused you loss. The claim is normally brought in the Superior Court of Justice and must be commenced within two years of discovering the breach under section 4 of the Limitations Act, 2002.
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To succeed in a breach of contract action in the Ontario Superior Court of Justice a plaintiff must establish four things: that a contract existed, what its terms were, that the defendant failed to perform an obligation those terms imposed, and that the failure caused loss that the law will compensate. Each element carries its own evidentiary burden, and disputes rarely turn on all four. In commercial matters the existence of a contract is often admitted and the fight is about what the terms meant and what the breach was worth.
A contract does not have to be in writing to be enforceable, with defined exceptions. Section 4 of the Statute of Frauds requires writing for certain agreements, including a promise to answer for the debt of another and contracts concerning an interest in land. Outside those categories, an exchange of emails, a signed quotation, a purchase order and a course of dealing can together form a binding agreement. That is a double-edged conclusion: it means informal arrangements are enforceable, and it also means people are bound by terms they did not read carefully.
Where the agreement is written and contains an entire agreement clause, a party seeking to rely on something said during negotiation faces a significant obstacle. The parol evidence rule limits the use of extrinsic evidence to contradict a written contract, although surrounding circumstances known to both parties at the time of formation may be used to interpret ambiguous language. This is why what was promised on a call is so often unrecoverable, and why the drafting stage matters more than the litigation stage.
The default remedy for breach of contract is damages, and the default measure is expectation damages: the sum that puts the innocent party in the position it would have occupied had the contract been performed. Where expectation loss cannot be proved with reasonable certainty, a plaintiff may instead claim reliance damages, being wasted expenditure incurred in reliance on the promise. Restitution is available where the defendant has been unjustly enriched. Specific performance, an order compelling actual performance, is discretionary and is generally reserved for cases where damages are an inadequate remedy, most commonly involving unique property.
| Remedy | What it does | When it is realistically available |
|---|---|---|
| Expectation damages | Puts the plaintiff in the position of full performance | The standard award where loss can be quantified |
| Reliance damages | Recovers wasted expenditure | Where expected profit is too speculative to prove |
| Restitution | Reverses an unjust enrichment | Deposits and prepayments where no value was delivered |
| Specific performance | Compels performance of the obligation | Discretionary, and usually only where the subject matter is unique |
| Injunction | Restrains a continuing or threatened breach | Courts of Justice Act s.101, on the established three-part test |
| Declaration | Determines the parties rights under the contract | Where the dispute is about meaning rather than money |
Prejudgment interest is available under section 128 of the Courts of Justice Act and postjudgment interest under section 129, at the rates set by the Act unless the contract provides its own rate, in which case section 130 gives the court discretion to depart from the statutory rate. A contract that specifies interest on overdue accounts is therefore worth more than one that does not, particularly where recovery takes several years.
Mitigation is the defence that most often reduces a contract award. An innocent party is required to take reasonable steps to reduce its loss, and damages are assessed as though those steps had been taken. A supplier who loses a customer and makes no attempt to resell the goods, or a landlord who declines to re-let, will recover less than the face value of the lost bargain. The burden of proving a failure to mitigate rests on the defendant, but the practical consequence is that a plaintiff should document its mitigation efforts contemporaneously.
Remoteness is the second common limit. Damages are recoverable where they arise naturally from the breach or were within the reasonable contemplation of the parties at the time of contracting. Consequential losses such as lost downstream profits are frequently excluded on that basis, and in commercial agreements they are usually excluded expressly by a limitation of liability clause. Whether such a clause is enforceable depends on its wording, whether it was validly incorporated, and whether enforcing it would be unconscionable in the circumstances.
Other defences include the limitation period under section 4 of the Limitations Act, 2002, a valid termination in accordance with the contract, prior repudiation by the plaintiff, frustration where performance has become impossible through no fault of either party, want of consideration, and lack of authority of the person who signed. Many commercial contracts also contain mandatory arbitration clauses, which under the Arbitration Act, 1991 or the International Commercial Arbitration Act, 2017 will generally result in a court action being stayed in favour of arbitration.
Where one party repudiates, the innocent party must elect either to accept the repudiation and treat the contract as at an end, or to affirm it and insist on performance. The election should be made promptly and communicated clearly, because continuing to perform while complaining can be treated as affirmation and can forfeit the right to terminate.
Supply and sale of goods disputes are governed not only by the written contract but also by the Sale of Goods Act, which implies conditions as to title, correspondence with description, merchantable quality and fitness for purpose in defined circumstances. Those implied conditions can be excluded by express agreement between commercial parties, and most standard terms attempt to do exactly that. Whether the exclusion was validly incorporated, particularly where the parties exchanged competing standard forms, is often the whole dispute.
Services and consulting agreements generate a different pattern. The obligation is usually to perform to a standard rather than to deliver a defined outcome, so the argument becomes whether the work was deficient or whether the scope changed without a corresponding change order. In these matters the contemporaneous project record, including change requests, progress reports and approvals, determines the result far more reliably than the recollection of either party.
Distribution, agency and licensing disputes typically turn on termination. A distribution agreement terminated without the notice the contract requires, or terminated summarily where the contract permits termination only for cause, exposes the terminating party to damages measured by the profit that would have been earned over the notice period. Where the agreement is silent on term and termination, a court may imply a right to terminate on reasonable notice, and the length of that implied notice becomes the central issue.
Loan and guarantee disputes, shareholder loan repayment claims, asset purchase indemnity claims and disputes over earn-out calculations round out the commercial contract caseload. Purchase agreement disputes deserve particular mention: representations and warranties in a share or asset purchase agreement are contractual promises, and a claim for breach of them is a contract claim subject to whatever survival period, cap, basket and notice mechanics the agreement imposes. Those contractual limits frequently expire before the buyer even discovers the problem.
The single best predictor of the outcome of a contract action is the quality of the contemporaneous record. Rule 30 requires disclosure of every document relevant to any matter in issue in a party's possession, control or power, and the definition of document expressly includes data and information in electronic form. That means emails, messaging threads, accounting entries, project management systems and metadata are all producible, and the party who wrote candidly at the time will find those words in evidence.
When a dispute becomes reasonably foreseeable, the obligation to preserve relevant records attaches. Routine deletion policies should be suspended, backup cycles paused and custodians identified. Failure to preserve can lead to adverse inferences and to costs consequences under Rule 57.01, which expressly permits the court to consider conduct that unnecessarily lengthened the proceeding. Preservation is inexpensive; explaining a gap in the record is not.
Quantification also requires documentary support. A claim for lost profit needs financial records showing the margin that would have been earned, not an assertion of the revenue that would have been billed. A claim for the cost of remedial work needs invoices for work actually done. Where the loss is genuinely complex, lawyer accounting evidence served under Rule 53.03 may be required, and that expense should be built into the budget from the beginning rather than discovered at the pre-trial conference.
We confirm the limitation position, assemble the contract documents and correspondence, quantify the loss and check the defendant's ability to pay. A properly drafted demand letter resolves a meaningful share of contract disputes without a filing fee.
The action is commenced under Rule 14. If the claim is for money of $200,000 or less exclusive of interest and costs, Rule 76 simplified procedure applies and must be used.
Twenty days to defend after service in Ontario, thirty with a notice of intent. A pure question of contractual interpretation can sometimes be determined under Rule 21 without a trial.
Rule 30 documentary disclosure and Rule 31 examinations. Contract cases are document-driven, so the affidavit of documents usually determines the outcome long before anyone gives evidence.
Rule 49 offers are served to shift costs risk. Mandatory mediation under Rule 24.1 applies in Toronto. Where the material facts are not genuinely in dispute, Rule 20 summary judgment is often the efficient route in a contract case.
Most contract actions settle. The question is when, and on what information. Settling before discovery saves the largest single cost but leaves you negotiating without the other side's documents. Settling after documentary discovery but before examinations is often the best value point, because the documents are usually where a contract case is decided.
We act for both plaintiffs and defendants in contract disputes, and the analysis is the same either way: what does the document say, what can be proved, what is it worth, and what will it cost to find out. We give a written merits and recovery assessment before commencing anything, and a phased budget covering demand, pleadings, discovery, mediation and trial. We update both as the case develops, including when the update is unwelcome.
Where the amount in issue does not justify a Superior Court action, we will say so and point you to the Small Claims Court, which has jurisdiction to $50,000 under section 23 of the Courts of Justice Act. Where the contract contains an arbitration clause, we advise on whether it is enforceable and what arbitration will cost relative to litigation. Contact us to discuss a contract dispute.
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Toronto, ON M5J 2H7
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