Part 8: Time Limits, Breach & Remedies

Persons are required to abide by their contracts, to "discharge" their contractual obligations. Doing so completes the contract and frees each party from it.

In some circumstances, the same is true for those parties who want to and attempt to discharge their obligations but are prevented from doing so by some action of the other party. This interference with the contract (lawyers call it "repudiation") may free the party who is trying to perform from their contractual responsibilities.

Where the payment of a sum of money is one party's obligation, this must be done by offering legal currency of Canada. The creditor is not required to make change nor is the creditor required to accept a cheque.

If contractual obligations are not respected, the delinquent party is said to be in "breach of contract". Breach of contract allows a party to bring the party in default to court and to get the court to correct the situation, as best the court can. Because a contract is private law, the courts will not throw the full brunt of the law against a person found to be in breach of contract. On the other hand, as discussed below, a variety of tools are used by the courts in dealing with breach of contract and ensuring that the person who defaults on a contractual obligation adequately compensates the person who did not receive full contractual benefit.

Time Limits on Enforcing Contracts

It would make no sense if legal claims were allowed to exist forever. Signatories die and records are eventually lost. For this reason, any claim for breach of contract must be brought before the court within a certain period of time. This is called a "limitation period" and is usually set in a "statute of limitations". In the case of non-real estate contracts, the standard limitation is six years from the date the party would have first been entitled to bring action (i.e. the date of breach. Five years in Quebec.) A partial payment will set the limitation period clock back to the start.

The Statutes of Limitation protects contractors from debtors that disappear by suspending the limitation period for the time of hiding.

Contracts related to real-estate have very special rules governing the time limits of legal action taken upon them and tend to vary from province to province.

Breach and Remedies

Breach of contract comes in many forms. You could have a complete breach, where one party completely refuses to deliver on any part of their undertaking. In other situations, a person may do most of what the contract requires but omit or refuse to do a small residual portion. This latter situation is called "substantial performance" and it has the effect of binding the other party to performance, at least in an equivalent portion.

The first thing a lawyer will look for when faced with a possible breach of contract situation is a clause in the contract that has already decided what happens if there is a breach (see comments on "liquidated damages" and "exclusion clauses" on previous page). These clauses are perfectly legal and will bind the parties.

Another important factor is that each party has a responsibility to mitigate their losses. That means that even if your contractual partner is not keeping their end of the bargain, you should try to keep your losses at a minimum. For example, if you are fired in breach of your employment contract, you would be expected to try to find another job as soon as reasonable, to minimize your losses due to the breach. Or, if you sign a contract to deliver apples to another person, and that other person refuses to take delivery (in so doing, is in breach of contract), you would be well advised to try to sell the fruit elsewhere to minimize any damages that you suffer by the breach. The law does not require a party to do cartwheels to minimize losses; just what can be reasonably done without incurring substantial costs. A 1966 English case, Yetton v. Eastwoods Froy Ltd. stated the general rule by saying that: "if (the plaintiff in a breach of contract case) can minimize his loss by a reasonable course of conduct, he should do so, though the onus is on the defaulting defendant to show that it could be, or could have been, done and is not being, and has not been done." {Some of the cases below deal with mitigation of damages.}