“But we had a deal.” Nearly every contract dispute begins with those words. A renovator took a deposit and vanished, a supplier delivered half an order, a buyer backed out of a business purchase, or a client decided they just would not pay the final invoice. The sense of unfairness is real and often justified. What a court will ask, though, is more specific: can you prove there was a binding agreement, that the other side failed to do what it required, and that this failure caused you a loss that can be measured?
Ontario law on contracts comes largely from court decisions built up over a long time, along with some statutes covering particular situations. The core questions tend to be the same whether the dispute is over $3,000 in Small Claims Court or several million in the Superior Court. If you understand them before you sue or respond to a suit, you will have a far clearer idea of how strong your position really is.
This article is general information on Ontario contract law, and it is not legal advice. Outcomes depend on the wording of the agreement and the evidence, so a real dispute needs an individual assessment.
Element One: There Was a Binding Contract
A claim begins with an enforceable agreement. Courts generally look for an offer, an acceptance of that offer, consideration (each side gives something of value), an intention to be legally bound, and terms definite enough to enforce. In practice, the question is whether a reasonable person looking at the parties’ words and conduct would conclude they had made a deal, and what its essential terms were.
Most contracts need not be on paper. A verbal agreement can be perfectly valid, and so can a chain of WhatsApp messages or an email exchange. A hypothetical example: a Brampton homeowner texts a painter, “OK, $3,500 for the whole main floor, start Monday,” and the painter replies, “Done, see you at 8.” That may well be enough. It just leaves more room for argument about what “the whole main floor” included, whether paint was part of the price, and what happened when extra work came up.
There are some situations where the form matters. Ontario’s Statute of Frauds generally requires written evidence for an agreement about an interest in land and for a guarantee of someone else’s debt. Consumer contracts over certain thresholds are subject to requirements under the Consumer Protection Act, including for some home renovations and direct agreements. A contract can also fail if it is too vague, was made under duress, or was entered into by someone without capacity.
What helps prove it: the signed agreement, a quote and its acceptance, emails and texts, deposits and receipts, purchase orders, and a history of how you dealt with each other.
Element Two: What the Contract Actually Requires
Before you can establish a breach, you need to work out what was promised. Courts read contracts as a whole, giving the words their ordinary meaning, and in light of the surrounding circumstances known to both parties when it was made. Those circumstances help interpret the words, but they cannot rewrite a clear agreement.
Disputes frequently arise from a few types of provisions:
- Scope. Does “supply and install” include removing the old unit? Did the quote exclude permits?
- Timing. Is a stated date binding, or an estimate? Does the agreement say that time is of the essence?
- Payment. When is a payment due, and what triggers it? Are there milestones?
- Change orders. Does the contract require written approval of extras? Did the parties ignore that requirement in practice?
- Entire agreement clause. If there is one, a promise made before signing might not be enforceable, depending on the facts and the type of contract.
- Limitation of liability clause. A contract might cap the amount recoverable or exclude certain losses, which can dramatically change the value of the case.
Terms may also be implied in some cases, to give business effect to a contract or because a statute requires it. For instance, the Sale of Goods Act includes implied conditions about goods in certain sales unless they have been validly excluded, and the Consumer Protection Act protects some warranties in consumer agreements.
Element Three: The Other Side Breached It
Next, you need to show the other party failed to perform, whether that meant doing nothing, doing it badly, doing it late or doing something it promised not to do. It is your burden as the plaintiff to prove this on a balance of probabilities, which means more likely than not. If the defendant says a term did not apply to it or that it was excused, it may have to prove that.
Not all breaches are equal. A minor breach generally gives rise to a claim for damages, while the contract continues. A far more serious breach, one that deprives the other side of substantially the whole benefit of the agreement, may let the innocent party treat the contract as over. That is called repudiation. If you think you have this right and you stop performing, you need to be careful. Walking away over what a court later sees as a minor breach could make you the party in breach.
What helps prove it: photographs, inspection reports, delivery logs, time sheets, correspondence where the breach is acknowledged, and a report from a qualified person where the quality of work is at issue. Without that kind of support, a claim about shoddy work can become a contest of one person’s opinion against another’s.
Honesty also has a part to play. In Bhasin v. Hrynew, 2014 SCC 71, the Supreme Court of Canada recognized a general organizing principle of good faith in contract law and a duty of honest performance, meaning the parties must not lie to or knowingly mislead each other about matters directly linked to performing the contract. This does not require you to put the other side’s interests ahead of your own, and it will not rescue a bad bargain. It can matter, though, where someone was actively misled.
Element Four: The Breach Caused a Loss
A broken promise on its own usually leads to only nominal damages. To recover real money, you must show that the breach caused a loss, and be able to put a reasonable figure on it.
The general goal is to put you in the position you would have been in had the contract been performed. In many cases, this means:
- the unpaid price for work done or goods delivered;
- the reasonable cost of finishing or correcting the work;
- the difference between the contract price and the market price in certain sale disputes;
- lost profits that can be established with reasonable certainty;
- costs you wasted relying on the contract, in some cases.
Courts generally limit recovery to losses that flow naturally from the breach, or that the parties reasonably contemplated when they made the agreement. That is a principle tracing back to the old English case of Hadley v. Baxendale. If a hypothetical print shop in Brampton lost an unusually valuable contract when a repair company came a day late, the shop may have difficulty recovering those particular profits unless the repair company knew about that special risk.
Calculate your loss carefully and be ready to prove each number. Use receipts, invoices, estimates, financial statements or tax records where applicable. Lost profit claims often need solid accounting support. Damages for stress or inconvenience are not usually recoverable in an ordinary commercial contract, though there are exceptions, such as certain contracts that have peace of mind as their purpose. Punitive damages are exceptional.
Mitigation: You Have to Limit the Damage
If someone breaches a contract, you generally cannot sit back and let your losses grow. The law expects you to take reasonable steps to reduce them, and a defendant can argue that you could have avoided part of the loss. A landlord might have to try to re-rent a unit in some situations, for instance, and a buyer whose goods were not delivered might reasonably be expected to buy replacements.
You are not required to do everything possible, just what is reasonable. Keep records of what you tried: job postings, quotes, replacement orders, and so on. The costs of reasonable efforts are often recoverable too. It is generally the defendant who has to prove you failed to mitigate.
Defences You Should Expect
If you are suing, anticipate these. If you are being sued, consider whether they fit your facts.
- No contract was formed, or the terms were too uncertain, or the person who signed lacked authority.
- Limitation period. Most claims must start within two years of discovery under the Limitations Act, 2002.
- Wrong party. The contract was with a corporation, not its owner. Personal claims usually require a guarantee or a specific legal basis.
- Payment or performance. The obligation was met, or the debt has been paid.
- Set-off or counterclaim. The plaintiff owes the defendant money, perhaps due to deficient work.
- The plaintiff breached first. A serious breach may have ended the defendant’s duty to perform.
- Waiver or variation. The parties changed the deal through their words or conduct, or one party gave up a right.
- Misrepresentation, duress or unconscionability. The contract was induced by a false statement or was grossly unfair in the circumstances.
- Frustration. An unforeseen event that was no one’s fault made performance radically different from what was agreed.
- Exclusion clauses. The contract itself limits or excludes the claim, subject to how courts assess such clauses.
- Failure to mitigate. See the section above.
Remedies Beyond Damages
Money is the usual remedy. Sometimes, though, a court may order specific performance, which requires a person to do what they promised, often for land or unique items. An injunction may stop someone from breaking a promise, such as a valid restrictive covenant. Rescission can unwind a contract in certain situations. Those remedies are discretionary, and Small Claims Court can only order the payment of money or the return of personal property, so a claim seeking them generally has to be in the Superior Court.
Interest may be available too. If the contract sets a rate, that usually governs. Otherwise, the Courts of Justice Act provides for prejudgment and postjudgment interest.
Choosing Where to Sue
If you are claiming $50,000 or less, not counting interest and costs, Small Claims Court is the usual place. Starting in the Superior Court for a claim in that range generally requires leave. Claims above the limit proceed in the Superior Court, and many money claims of up to $200,000 use the simplified procedure. In Brampton, both courts operate on Hurontario Street, at 7755 for the Superior Court and 7765 for the Small Claims Court office. Check the details before you go. An arbitration clause in your contract might also send the dispute out of court altogether, so read yours first.
For general information on this category of dispute, see the firm’s page on contractual litigation. If your contract is with a business and you are reviewing it before a problem arises, see contracts on the corporate side.
A Simple Self-Assessment
Before you take action, write a one-page summary under these four headings:
- The agreement. When was it made, how, and between whom? Which documents show it?
- The term. Which specific promise was broken? Quote it if you can.
- The breach. What happened instead, and how can you prove it?
- The loss. How much did it cost you, and which records show that?
Add a fifth line for the date you discovered the problem, and count forward two years. If any of those sections is blank, you have found the part of the case that needs work. Bringing that page to a consultation can make it much more productive. Sawan Law House LLP can be reached through the contact page if you would like to review it with a lawyer. A dispute may feel personal, but the outcome is usually decided by that kind of plain, organized proof.