Breach of Contract

Damages, often manifested as monetary compensation, remain the primary remedy when a contract is breached. The cornerstone of determining the appropriate quantum of these damages is the compensation principle. This principle dictates that damages should mirror the loss experienced by the innocent party due to the contract breach. Hence, in theory, the awarded damages should place the innocent party in a position akin to if the contract had been satisfactorily executed.

However, the compensation principle is rife with complexities. For instance, one must decipher what the law deems relevant when assessing the position the innocent party should be placed in post-breach. The principle may at times not capture the actual state of affairs, especially if considering rules that limit certain types of compensation. An example would be when a seller fails to deliver agreed-upon goods, and the buyer is limited to recovering the difference between the contract price and the market price. Such rules might not address non-tangible losses like disappointment. The underpinnings of these conventional limits are not strictly rooted in the compensation principle but are typically acknowledged, often resulting in the innocent party being undercompensated.

The nature of the incurred loss dictates the compensation needed to restore the innocent party’s position. Losses might stem from lost profits or unforeseen expenses resulting from the breach. An oversimplification would be to suggest that the innocent party must choose either lost profits or additional expenses as their loss metric. It’s essential to note that ascertaining these losses is a detailed endeavour and can become convoluted if facts aren’t clearly understood.

In line with the compensation principle, it’s argued that damages shouldn’t elevate the innocent party’s position beyond what it would have been if the contract had been fulfilled. For example, if a building owner’s property was damaged due to a contract breach, the awarded damages would factor in the building’s age and its expected lifespan. Similarly, if a tenant damages leased premises, the wear and tear expected over the lease’s duration would be considered when awarding damages.

In situations where there’s a significant discrepancy between the cost of proper contract performance and the loss in value, courts tend to favour the lesser amount. Additionally, in cases of alternative contract performance options, losses are usually calculated assuming the breaching party would have chosen the most financially favourable method for themselves and the least beneficial for the innocent party.

“Extended damages” remains a nebulous term, generally referring to losses not traditionally covered by the compensation principle. Two such types are “consumer surplus” and damages for mental distress or lost enjoyment. For instance, a consumer might not suffer economic loss when a product isn’t delivered as promised but might experience disappointment. This emotional aspect is starting to gain recognition in courts. Additionally, there’s a growing acceptance for damages pertaining to loss of enjoyment or mental distress in select cases, like when there’s an implicit promise of peace of mind or pleasure.

Interestingly, while mental distress caused by wrongful dismissal was once overlooked by the Supreme Court of Canada, there’s now acknowledgment that such distress could be foreseeable upon the creation of certain contractual relationships.

Drawing from tort law, principles of contribution and apportionment might find relevance in contract breaches, especially when there’s shared responsibility for a loss. However, this application is debated, and in some scenarios, risk allocation might render one party’s negligence irrelevant.

Another essential concept is causation. The aggrieved party must demonstrate that the breach directly resulted in the loss. In situations where the breaching party’s actions obscure the proof of loss or they withhold pertinent information, assumptions often swing against them. When awarding damages, courts aim to be as precise as possible. However, due to unforeseen factors, estimations might lack accuracy. Sometimes, contracts are breached, depriving one party of potential opportunities; courts have compensated for this “loss of chance.”

Damages are generally limited to foreseeable losses or those that both parties had contemplated upon contract initiation. However, what’s deemed foreseeable isn’t the sole determiner of liability. The principle of mitigation, or the doctrine of avoidable harms, emphasizes that an aggrieved party should act reasonably to minimize losses post-breach.

Equitable remedies, such as specific performance and injunctions, also play a pivotal role in addressing contract breaches. These remedies act on the conscience and consider the concept of beneficial ownership. While they are discretionary, their application is grounded in well-established legal principles. Specific performance, for instance, is an option when damages are deemed inadequate. The doctrine of mutuality once suggested that both parties to a contract could seek specific performance. However, this doctrine has evolved, now being absorbed into broader principles preventing injustice or unfairness.

Lastly, hardship can sometimes be a factor in refusing specific performance. Ideally, such hardships should be post-contractual, ensuring fairness in execution.

Yes, it’s possible to challenge a contract that you were pressured to sign. There are several legal doctrines that allow for this, with undue influence being one of the most significant.

In legal terms, undue influence occurs when a person uses their power over another to convince them to enter into a contract. This doctrine is equitable in nature, meaning it’s based on fairness. This concept differs from duress, which focuses on the circumstances during the creation of a contract, while undue influence examines the broader relationship between the parties involved.

To establish undue influence, there must be proof of two elements:

1. A relationship capable of giving rise to the necessary influence.
2. Evidence that the influence generated by the relationship was abused.

The relationship can either be “proved” or “presumed,” but it must be shown to have been exploited.

Three scenarios are generally used to establish a relationship affected by undue influence:

1. Irrebuttable Presumption of Undue Influence: This situation occurs when the relationship falls into specific categories that the law recognizes as inherently having an imbalance of power, such as parent-child or doctor-patient. In these cases, the law presumes that one party had influence over the other.

2. Rebuttable Presumption of Undue Influence: In these situations, there’s proof that one person placed trust or confidence in the other, and there’s a questionable nature to the transaction. The law will presume undue influence, but this presumption can be refuted.

3. Relationship of Actual Undue Influence: This category applies to situations that don’t fit into the other two. Here, there is proof of actual pressure, and the transaction might be better seen as economic duress.

The concept of undue influence has been widely accepted in Canada, with the Supreme Court of Canada recognizing it in the case of Geffen v. Goodman Estate.

Once undue influence is established, the burden shifts to the defendant, who must show that the plaintiff entered into the contract as a result of their own “full, free, and informed thought.” The defendant can demonstrate this through evidence that no actual influence was deployed in the transaction, that the plaintiff had independent advice, or that the contract was not unfairly advantageous to the defendant or disadvantageous to the plaintiff.

It’s also possible for a third party to exert undue influence on a contracting party. However, for this undue influence to be actionable, that third party must be acting either as an agent for one of the contracting parties or with the notice of that party. A classic example is a spouse who exerts undue influence on their partner to sign a contract with a third party, such as a bank.

In summary, if you were forced to sign a contract due to the undue influence of another party, you can challenge the contract. The contract could be rescinded, or made void, if you can successfully demonstrate that undue influence was exerted. It’s always advisable to seek legal advice if you believe you’ve been a victim of undue influence.

A contract’s enforceability when a mistake is present depends on the nature and type of mistake involved. Mistakes in contracts can be complex, and the law surrounding them is one of the least certain areas of contract law.

1. Types of Mistakes:

a. Unilateral Mistake: Where one party is mistaken, and the other is not.
b. Mutual Mistake: Where both parties have conflicting mistakes.
c. Common Mistake: Where both parties share the same mistake about the contract.
d. Mistake in the Written Record: A typographical error, dealt with through rectification.

2. Legal Treatment of Mistakes:

a. Non Est Factum: This concerns a major mistake about the nature of the written contract. Courts might void a contract if it is fundamentally different from what one party believed they were signing.
b. Mistake as to Content or Terms: If the mistake relates to the essential terms, it may render the contract void or voidable.
c. Mistake as to Assumptions: If a mistake regarding the identity of a party or a significant contextual assumption is present, specific legal principles may apply.
d. Rectification: This applies to mistakes in the written evidence of the contract, not the agreement itself, and serves to correct typographical errors.

3. Common Law vs. Equitable Principles:

The law on mistake is sometimes handled at common law and other times considered under equitable principles. There are rarely statutory provisions governing the law of mistake. The distinction between legal and equitable principles can create confusion and make the application of precedents difficult.

4. Uncertainty in Law:

The principles and circumstances in which the courts will intervene for mistakes in contracts have not been precisely settled. Different cases may have varying interpretations, and some decisions may be difficult to reconcile.

Conclusion:

The enforceability of a contract in the presence of a mistake depends on various factors, including the type of mistake and the specific circumstances surrounding it. It is a nuanced area of law with significant complexities. If a mistake is believed to have occurred in the formation of a contract, seeking legal advice from a professional experienced in contract law is strongly recommended, as the application of the law may differ based on individual situations and jurisdictions.

Yes, a contract may be breached through what is known as an “anticipatory” or “repudiatory” breach. This type of breach occurs when a party to the contract informs the other party that they will not be performing their contractual obligations when the time comes, or it becomes evident in advance that they will not be able to fulfill their end of the deal without any valid excuse such as frustration to relieve them from liability. This has been affirmed in several legal cases.

An anticipatory breach can also be referred to as a “renunciatory” breach. In the context of an anticipatory breach, the innocent party has two options:

1. Accept the Breach: The innocent party can accept the anticipatory breach and proceed to remedies immediately.

2. Affirm the Contract: Alternatively, the innocent party may choose not to accept the early breach and wait for the time or times when the contract requires performance, seeking remedies only if the breaching party fails to perform.

The decision to accept or reject the anticipatory breach must be clearly evidenced. The party in breach cannot complain if sued immediately for compensation by the injured party.

The anticipatory renunciation can be expressed through words, conduct, or both, and the party must “evince an intention” not to go on with the contract.

In some cases, the innocent party may have no real choice but to accept the repudiation if the actions of the breaching party make it impossible for them to carry on with their obligations. When the innocent party does have a choice, clear evidence must exist that the anticipatory breach has been accepted, and subsequent acts of the innocent party may be taken as such evidence.

In conclusion, if the other party tells you they cannot fulfill their end of the deal, it can indeed amount to a breach of contract, specifically an anticipatory or repudiatory breach. Your response as the innocent party will determine whether you accept this breach immediately or affirm the contract, awaiting actual failure to perform. Legal counsel should be sought to navigate the specific circumstances and potential remedies available in any given situation.