What is a Breach of Contract and How Do I Take Action?

Whether we realize it or not, contracts are fixtures of our daily lives. Fundamentally, a contract involves (1) an offer; (2) an acceptance; and (3) consideration. The morning dose of caffeine which costs you $3.50 is the consideration you pay in return for the café’s offer of a cup of coffee. We enter into a contract when one party extends an offer to us, which we then accept and compensate according to the terms of an agreement.

The terms of a valid contract impose legal obligations on each party to the contract. Such a contract need not be in writing, but it must be clear enough to convey the true intentions of the parties. Judges exercise great caution when determining the intention of the parties and hesitate to read terms into a contract when it is not perfectly clear what the parties had agreed to. For this reason, written contracts are recommended, especially when large sums of money are being negotiated.

“Breach of contract” refers simply to a violation of the terms of a contract, either by the action or inaction of an individual or a business. If you are the victim of a contractual breach by your opposing contractual party, you may have options depending the nature of the contract and on the type of contractual breach. You must act quickly, however, as the BC Limitations Act imposes a limit of two years from the time that you discovered the breach to bring a claim before the courts.

Taking Action: Preliminary Considerations

If you are contemplating a claim for breach of contract, first read the terms of the contract carefully in order to determine whether it contains any clause that would limit the courses of action available to you. An exclusion clause, for example, may indicate a ceiling amount of damages beyond which monetary claims for breach of contract will not be permitted, or it may altogether bar one or both contractual parties from seeking damages.

Even if an exclusion clause is found to be applicable, the courts may nevertheless decide to omit the exclusion clause if, according to the Supreme Court of Canada, the clause “was unconscionable at the time the contract was made”. Determining whether an exclusion clause can withstand the scrutiny of the court should be supported by the expertise of a lawyer.

It is also important to determine whether the contract has a ‘cooling off’ period. This means that a clause within the contract provided that during a defined period of time, either of the contracting parties may decide to get out of a contract without consequence. There are several types of transactions for which BC law foresees a cooling off period, such as contracts for vehicle lease agreements or gym memberships.

Routes to Remedying a Breach of Contract

In most instances, the victim of a breach of contract will seek monetary damages for the expenses incurred as a result of the breach. In exceptional cases, the damages awarded may also go beyond expenses incurred by the victim and seek to punish the erring party. These ‘punitive’ damages are often awarded in cases of wrongful dismissal of an employee (i.e., the unlawful termination of an employment contract).

Other victims may seek specific performance remedies, meaning that they ask the court to order the opposing party to perform some act or do something that is required by the contract. Specific performance is an exceptional remedy, but it may be awarded in cases where monetary damages are inadequate or where the contract involved something unique, such as a heirloom piece, or real estate property.

Similar to specific performance, an ‘injunction’ may also be pursued where the victim seeks the opposing party to take specific action, or to refrain from some action, in order to mitigate the breach of contract.

It is important to remember as you consider taking action for a breach of contract that the court will pay attention to your actions as well.  For example, when assessing damages, it will often note if you have not done your part in mitigating your losses. In addition, the opposing party may launch a counterclaim against you alleging that you breached the contract which you would then have to defend at the same time as advancing your own claim.

Get Professional Advice

If you are in dispute with a business partner, a supplier, a vendor or a customer over at least $100,000, our lawyers have the expertise to help you decide on the best course of action. Call our experienced lawyers on 604-668-9542 or email us on our contact form.