To avoid contract disputes and the dominos effect of a badly written contract, it is important to hire a contract lawyer in advance to professionally draft your contracts. That would be the most efficient preventive measure to ensure that you are legally protected years ahead. However, if there has been a breach of contract, this is what you need to know. Broadly speaking, the remedies for breach of contract are threefold.

Monetary Awards

A monetary award in Canadian dollars or damages is the standard remedy for breach of contract. When calculating this award, the importance lies in considering the recognizable heads of damages under which these awards will be granted. They are found in common Law, also known as Case Law rendered by judges through cases or “decisions”.

Heads of Damages

The Compensation Principle

For a fair monetary award, judges apply the compensation principle which stipulates that the amount of damages awarded in each circumstances should be equal (so far as an amount of money can be) to what is required to compensate the innocent party for the loss it has suffered as a result of the breach. In essence, the principle is attempting to place the Plaintiff (the victim)  in the same situation, with respect to damages, as if the contract had been performed.

Is the requested compensation based on lost profits? Or additional expenses incurred because of the breach? Judges will want to take a look at that.

To avoid Defendants from having an incentive to postpone payment remedies, judges accept calculating compensation considering the period from the breach until the day of judgment.

Issues and obstacles that Plaintiffs will face:

1. Defendants will always argue against putting the Plaintiffs in a better position than they would be in because of the context.
2. Where one or more ways of performing a contract is open to a party who breached the contract, the losses will be calculated on the assumption that the party would have had performed the contract in the most financially advantageous manner to it and the least financially advantageous manner to the innocent party.
3. Courts do not award unreasonable amounts, regardless of the significant difference between what was promised and what was actually paid because of the breach.
4. Damages will be limited to that which can be said to arise naturally (this is the concept of foreseeability) — the loss must have been in the contemplation of the both parties at the time they entered into their contract.
5. Plaintiffs have a duty to mitigate the loss. This means that Plaintiffs will not be compensated for losses incurred that could have been reduced by taking action to solve the issue. Defendants will attempt to counterargue requested amounts based on this legal principle.

Disappointment

A consumer’s disappointment is compensable even if there was no financial loss suffered. If the cost of replacing the contracted item is out of all proportion to the financial loss suffered, yet the consumer was disappointed for a certain reason, the disappointment could be compensated.

Mental Distress or Loss of Enjoyment

This is compensable if the promisee was promised peace of mind or enjoyment. An unreasonable denial of coverage by an insurance company could for example cause such harm. However, a major or important object of the contract in question must be to give pleasure, relaxation or peace of mind; or where an object of the contract is to secure a psychological benefit, just as they may be awarded where an object of the contract is to secure a material one.

Loss of Chance

If a breach of contract deprives a party of the loss of a chance, courts are prepared to compensate a party for that loss (Parabola Investments Ltd. v. Browallia Cal Ltd, 2011 Q.B. 477 (CA)). The importance here is the chance that is lost, which will be calculated as a percentage of the actual gain coming from the positive entitlement to the opportunity. A chance is not the actual opportunity secured. This is an important difference.

Equitable Remedies

Judges use Equity and set aside the hard Law when they decide to remedy an injustice that the Law does not do so. Courts are prepared to apply discretionary power (also known as “equitable remedies” that are outside the strict rules of Law) and order a “specific performance”, the “forced performance of a contract” or an “injunction”.

Specific Performance

This remedy is available on a judge’s discretionary basis only when monetary awards are inadequate or inappropriate. Inadequacy could be for example the impossibility of duplicating the product or object in the contract anywhere else. A judge’s order of specific performance obliges the defendant to perform their obligation under the contract. The concept of mitigation mentioned above applies here too.

The obstacle to this remedy is that judges also look at whether specific performance would cause the performer any hardship. Hardship could negate specific performance on a case-by-case basis.

Injunction

An injunction is a temporary or permanent order that a party refrain from some activity.

Proprietary Remedy

In exceptional cases, courts are prepared to grant a proprietary remedy, which is a transfer or recognition of some property rights in some asset, for breach of contract.

According to the Supreme Court case Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, at paras. 49 and 91, in order to successfully seek these remedies, one must first prove a breach of contract which is broken down to proving:

1. The existence of the contract; then
2. The breach of a term in it; -Proving a breach stops here-

Next comes dealing with and compensating the loss, which entails proving:

1. Causation: When it comes to losses, the party seeking a remedy for breach of contract bears the burden, on a balance of probabilities (which means on a scale of “which evidence is more likely than not to prove a fact?”), of showing that the breach caused its loss;
2. The amount of loss is only relevant to calculating damages/the monetary awards. If no amount of loss is proved, the Plaintiff would receive only nominal damages; except if the Defendant is making it extremely difficult for the Plaintiff to gather evidence, in which case, judges will be favoring more damages to benefit the Plaintiff. Imprecise estimates of loss are acceptable (Houweling Nurseries Ltd. v. Fisons Western Corp., 1988 BCCA No. 306). However, this leads judges to often significantly cut the amounts requested in their judgments.

A Contract Lawyer specializing in Contract Drafting and Contract Disputes prevents you from facing most of the issues by leveraging their legal expertise when drafting a protective contract for you. It is important to invest in legal when drafting an agreement. Contract lawyers foresee these legal issues and find preventive ways around them which will save you a significant amount of money on the long term.

Invest in Contract Lawyers. Rana Charif is a Toronto Contract Lawyer who has drafted hundreds of commercial contracts, business partnership contracts, employment contracts, licensing contracts, and more. She is a highly accomplished lawyer who works with a standard of excellence, see her bio here. Whether it is for drafting your contracts or representing you and giving you legal advice on solving contract disputes, Rana will be here for you and leverage top legal talent to serve you best.

Book a consultation now with a Contract Lawyer in Toronto, Ontario.