Chapter14

Breach of Contract and Remedies

Overview of Chapters

  • Focus on contemporary Canadian business law principles and cases.

  • Prepared by: Renee Majeau, NAIT.

Chapter Objectives

  • Distinguish between types of breach of contract.

  • Explain compensation principles for loss.

  • Describe legal remedies available to injured parties.

  • Explain enforcement means for these remedies.

Nature of Breach of Contract

Types of Breach

  • Express Breach: Explicit refusal to fulfill contract promises.

  • Implied Breach: Breach inferred from actions/inaction of a party.

Rights of Injured Parties

  • Injured parties can seek:

    • Damages: Compensation for the injury suffered.

    • Rescission: Court order requiring performance of the contract.

    • Both: Depending on the nature of the breach.

Express Repudiation

Definition

  • Explicit refusal to perform contractual obligations.

  • Can either be direct or inferred from conduct.

Implications of Express Repudiation

  • Allows injured party to end the agreement if the refusal to perform is evident.

Anticipatory Breach

Definition

  • Forewarning by a party that they will not fulfill the contract at the time of performance.

  • In case of significant conditions, the other party can terminate the agreement.

  • Injured party can withdraw from their promise of performance.

Conditions for Rescission

  • Complete rescission is possible if repudiation affects the contract's core aspects.

Doctrine of Substantial Performance

Definition

  • Acknowledges situations where a breach has occurred but significant fulfillment of the contract has taken place.

  • Injured party cannot escape their obligations due to the breach but may deduct damages or receive a price reduction.

Warranties in Contract

Definition

  • Minor terms in a contract regarding the sale of goods.

  • Do not afford the right to rescind the contract for breach by the other party.

Implied Repudiation

Definition

  • Breach inferred from actions or insufficient performance over time.

  • Risk involved in concluding that a party has repudiated based solely on conduct.

Fundamental Breach

Definition

  • A severe breach that undermines the essence of the contract.

  • Courts use this to balance power dynamics between buyers and sellers.

  • Injured parties can rescind the contract and seek damages.

Exemption Clauses

Definition

  • Clauses that limit liability for breaches of contract.

  • Courts tend to scrutinize these clauses against the party that included them in the contract.

Compensation for Loss

General Concept

  • Injured parties have the right to compensation that restores them to the financial position they would have been in if the contract had been performed.

  • Types of compensation include:

    • Monetary Damages: Regular form of compensation.

    • Specific Performance: Remedy requiring the party to fulfill their contractual obligations.

    • Quantum Meruit: Recovery for services rendered under quasi-contract principles.

Types of Damages

  • General Damages: Losses naturally arising from the breach.

  • Special Damages: Specific to the circumstances of the breach, not naturally predictable.

  • Punitive Damages: Awarded to punish misconduct, not typical for standard breaches.

Foreseeability and Liability

Concepts

  • Reasonable Foreseeability Rule: Liability extends to damages foreseen at the contract’s inception.

  • Contemplation Test: Focused on foreseeable damages based on what a reasonable person would expect from the breach.

Duty to Mitigate Loss

Definition

  • Obligation of the injured party to take reasonable steps to minimize their losses.

  • Failure to mitigate may reduce the amount recoverable from the breaching party.

Liquidated Damages

Definition

  • Pre-determined compensation for breaches, agreed upon at contract formation.

  • Must reflect a genuine estimate of potential losses.

Penalty Clauses

  • If deemed excessive compared to actual damages, treated as a penalty and thus unenforceable.

Remedies for Breach of Contract

  • Monetary Damages: Primary remedy for breach.

  • Specific Performance: Required in cases where damages are insufficient.

  • Injunction: Preventative remedy against potential breaches.

  • Quantum Meruit: Compensation when contractual price was not established.

Enforcement of Judgments

Overview

  • Writs: Court orders for enforcing judgments, including:

    • Writ of Seizure and Sale: To recover owed amounts through seizure of property.

    • Writ of Sequestration: Seizing property to satisfy debt.

    • Writ of Possession: Removing individuals from their properties by force if necessary.

Conclusion on Breach of Contract

  • Clear definitions of different breach types and the associated remedies are crucial for understanding obligations and rights under Canadian business law.