Someone Broke Your Contract. Does That Mean You Can Sue?

What you need to prove a breach of contract claim

To succeed in a breach of contract claim in Ontario, you generally need to establish four things:

1. A valid contract existed

There must be a legally binding agreement: an offer, acceptance, consideration (something of value exchanged by each party), and an intention to create legal relations. A handshake deal or informal email exchange can be a valid contract in Ontario, but proving its terms is much harder without a written document.

2. You performed your own obligations

A party cannot claim breach of contract if they themselves failed to meet their obligations under the same agreement. Ontario courts look at whether you fulfilled your end of the bargain before awarding relief.

3. The other party breached the contract

You need to show what the contractual obligation was and how the other party failed to meet it, through evidence such as emails, invoices, photographs, or witness testimony.

4. You suffered a loss as a result

Even if a breach occurred, you can generally only recover compensation for losses actually caused by the breach. Courts do not award speculative or unforeseeable damages.

Types of breach of contract

Ontario courts distinguish between different types of breach. The type matters because it affects what remedies are available to you.

Material breach (fundamental breach)

A material breach is a serious failure that goes to the root of the contract and defeats its entire purpose. A material breach gives the innocent party the right to treat the contract as ended and to sue for all resulting damages.

Minor (partial) breach

A minor breach occurs when the other party substantially performs their obligations but fails in some smaller respect. The innocent party can sue for damages caused by the shortfall but cannot cancel the entire contract.

Anticipatory breach

An anticipatory breach occurs when one party makes clear, before their performance is due, that they will not be fulfilling the contract. The innocent party does not have to wait until the breach date arrives. They can treat the contract as terminated immediately and begin a legal claim.

Repudiatory breach

A repudiatory breach is one so serious that the innocent party can choose to accept the repudiation and treat the contract as ended, or affirm the contract and insist on performance. Courts have held that continuing to act under a contract after learning of a repudiation can amount to an election to affirm it, so legal advice at this stage is important.

Common examples of breach of contract in Ontario

Breach of contract disputes arise across virtually every area of commercial and personal life. Common examples include:

• Construction and renovation: A general contractor abandons a job halfway through or uses substandard materials.
• Sale of goods: A vendor fails to deliver goods on time, delivers the wrong product, or shorts an order.
• Professional services: A client refuses to accept completed work and will not pay.
• Non-solicitation / non-compete: An agency poaches a client in violation of a non-solicitation clause.
• Shareholder agreements: Shareholders violating buy-sell or shotgun provisions.
• Partnership agreements: A business partner starting a competing business in breach of a restrictive covenant.
• Real estate: Refusing to close a real estate transaction after a firm agreement.

What are your legal remedies for breach of contract?

The goal of breach of contract remedies in Ontario is to put the innocent party in the position they would have been in if the contract had been properly performed, not to punish the party in breach.

Damages

Monetary compensation is the most common remedy. Types include:

• Expectation damages: compensating for the benefit you expected (lost profits, cost of replacement)
• Consequential damages: losses flowing naturally from the breach, including foreseeable indirect losses
• General damages: for losses difficult to quantify precisely, such as lost business opportunities
• Nominal damages: a small sum awarded when a breach is proven but no significant loss is established

Ontario courts require the innocent party to take reasonable steps to mitigate (reduce) their losses after a breach. Failing to mitigate can reduce your damages award significantly.

Specific performance

A court can order the party in breach to carry out their contractual obligations. This is most common where the subject matter is unique, such as real estate, a specific asset, or a one-of-a-kind business, where money alone would not adequately compensate.

Injunctions

A court can issue an injunction to stop ongoing breach of a contract, particularly relevant for non-compete clauses, confidentiality agreements, and restrictive covenants where damages cannot adequately address the harm.

Rescission and restitution

Where the breach is serious enough, the innocent party may be entitled to rescind (cancel) the contract entirely, unwinding it and restoring both parties to their pre-contract positions, including return of money paid.

Defences to a breach of contract claim

Being sued for breach of contract does not automatically mean you will lose. Established defences under Ontario law include:

The other party also breached

If the plaintiff failed to meet their own obligations, for example, failing to make a payment that was a condition of your performance, this can be a complete or partial defence.

Frustration

The doctrine of frustration applies where an unforeseen event made performance impossible or radically different from what the parties agreed to. COVID-19 generated significant frustration litigation in Ontario. Frustration is a narrow doctrine and does not apply simply because performance became more difficult or expensive.

Misrepresentation or mistake

If you entered the contract based on a material misrepresentation by the other party, or a fundamental shared mistake about the subject matter, the contract may be voidable.

Limitation periods

In Ontario, the basic limitation period for a contract claim is two years from the date you discovered (or ought to have discovered) the breach. If the plaintiff waited too long to sue, their claim may be statute-barred regardless of its merits.

The contract is unenforceable

Certain contracts are unenforceable as a matter of law, including contracts for illegal purposes, contracts lacking consideration, or contracts that violate the Statute of Frauds (which requires certain agreements to be in writing).

How long do you have to sue for breach of contract in Ontario?

The limitation period in Ontario is governed by the Limitations Act, 2002:

• Basic rule: two years from the date you knew, or ought to have known, about the breach.
• Ultimate limitation: 15 years from the date the breach occurred, regardless of when you discovered it.

There are exceptions and special rules for certain types of contracts, including real estate agreements, employment contracts, and consumer agreements, so legal advice on the specific limitation period that applies to your situation is important.

When to call a breach of contract lawyer

You should speak with a litigation lawyer as soon as possible if:

• The other party has stopped performing their contractual obligations
• You have received a demand letter or been served with a statement of claim
• The other party has told you they will not be completing the contract
• The losses involved are significant, even if the amount seems uncertain
• You are unsure whether a breach has actually occurred
• You want to terminate a contract and need to know whether you can do so legally
• You have been sued for breach of contract and need to understand your defences

Timing matters significantly in contract disputes. Acting quickly helps preserve evidence, protects your position on mitigation, and ensures you do not inadvertently waive your rights or miss a limitation deadline.

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