Breach of contract

How BC law treats it

A breach can be minor or serious. A breach of a minor term allows only a claim for damages. A breach that goes to the root of the contract, or a clear refusal to perform, is a repudiation: the innocent party can elect to accept it, end the contract and sue for damages, or affirm the contract and insist on performance. The election should be made clearly and promptly. Damages aim to put the innocent party where it would have been had the contract been performed. Losses are recoverable if they were within the reasonable contemplation of the parties when they contracted (Hadley v Baxendale (1854), 156 ER 145). The innocent party must take reasonable steps to mitigate, and cannot recover losses it could reasonably have avoided. Specific performance and injunctions are discretionary and usually reserved for cases where damages are inadequate, such as unique assets. Every contract carries a duty of honest performance: a party must not lie to or knowingly mislead the other about matters directly linked to performance (Bhasin v Hrynew, 2014 SCC 71). In C.M. Callow Inc v Zollinger, 2020 SCC 45, this included actively misleading a contractor into believing its contract would not be terminated while the owner had already decided to terminate it. Under the Limitation Act, SBC 2012, c 13, the basic limitation period is two years from the day the claim is discovered (ss. 6 and 8), subject to an ultimate limitation period of 15 years (s. 21). Claims up to $5,000 generally go to the Civil Resolution Tribunal, claims up to $35,000 to Small Claims Court, and larger claims to the BC Supreme Court by notice of civil claim.

What it means for your business

Contract disputes are the most common legal problem for BC businesses. Knowing whether a breach is minor or repudiatory decides whether you can walk away or must keep performing. Missing the two year limitation period can end a strong claim. Keeping good records, sending a clear demand letter, and mitigating losses early all improve recovery and settlement leverage. Clear termination and notice clauses drafted at the outset make every later decision easier. Example: A Kamloops manufacturer's supplier stops delivering components mid-contract. The manufacturer accepts the repudiation in writing, buys replacement parts at a higher price to keep production running, and sues for the price difference within two years.

Risks and common mistakes

Stopping performance in response to a minor breach, which can turn the innocent party into the party in breach. Waiting too long to decide whether to accept a repudiation or affirm the contract. Failing to mitigate losses and then claiming them in full. Missing the two year limitation period while negotiating. Misleading the other side about termination or renewal plans, breaching the duty of honest performance.