Legal Blog

Contract Breach

Clark v. 189557 Ontario Inc. 2016 Ont SCJ

Settlement agreement on a wrongful dismissal case. Employer paid $18,000 of the $36,000 settlement in 6 installments, but was unable to pay the remaining $18,000. The employee sued for the full amount that he felt he could have claim for wrongful dismissal, $145,000. In the alternative, he claimed the remaining $18,000 due on the settlement agreement. The judge analysed the various contractual remedies. The judge held that:

a) There was no fundamental breach that would allow the employee the right to treat the settlement agreement at an end. The employer’s breach did not deprive the employee of substantially the whole benefit of the settlement agreement.

b) Rescission allows an innocent party to treat the contract as if it were void from the beginning, but rescission is available only when a party has made a false or misleading representation. The employer never made such a representation.

c) Repudiation evinces an intention not to be bound by the contract. The test is objective. Just as for fundamental breach, the court must ask whether the breach deprives the innocent party of substantially the whole benefit of the contract. A simple breach of contract is not necessarily a repudiation of the contract. In any case, contrary to rescission, repudiation depends on an election to be made by the non-repudiating party. If that party treats the contract in full force and effect, the contract remains in force for both parties. If the non-repudiating party accepts the repudiation, the contract is terminated and the innocent party can sue for damages for failure to receive its benefits under the contract. The judge held that the employer had not repudiated the contract; it was just unable, due to financial circumstances, to continue to make the remaining payments. The judge awarded damages for simple breach of contract and awarded the balance due under the settlement agreement.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.