How Does Contract Law Work?

Contract law is a form of private law that governs how businesses interact with each other. It provides certainty when they enter into agreements, transactions, or arrangements with each other. If one party breaches an existing contract by not living up to its end of the agreement, the other can ask for the court’s assistance to remedy the breach.

Working closely with Toronto business lawyers is crucial if you’re in business. They can evaluate your business to ensure it complies with the contract law in Canada. They can also help you resolve legal disputes while partnering, transacting, or interacting with other business entities.

Contracts Are Legally Binding

Contracts are the backbone of business transactions, serving as promises between two or more parties. They signify a legal obligation to honour the terms of the business transaction, describing what each party must do and what it is entitled to from the other party.

Contract laws stipulate the principles determining whether an agreement is legally binding. That is crucial because not all agreements are contracts. Skilled Ontario contract agreement lawyers can evaluate your business agreements to determine if they’re legally enforceable, depending on whether specific conditions have been met.

Business contracts and corporate agreements are crucial because they protect you and your business when properly drafted. They protect tangible assets like business premises and employees and intangible assets such as intellectual property, goodwill, names, and websites. You can quickly lose these assets if you don’t protect them adequately.

In What Areas of Business is Contract Law Applicable?

While contracts are the “law of parties,” they must not contradict public order. That means that freedom of contract is not absolute, but contract law is generally used for the following purposes:

  • Leasing agreements
  • Sales agreements
  • Insurance
  • Loan and mortgage
  • Employment agreements
  • Rental agreements
  • Donation agreements
  • Company and service agreements
  • Consumer agreements
  • Agreements with foreign parties
  • Non-disclosure Agreements (NDAs)

Skilled contract agreement lawyers in Ontario can help you create contracts around these issues. They can also help you resolve problems arising from a breach of contracts.

What is Breach of Contract?

Ideally, contracts should serve the interests of all the parties involved, but this doesn’t always happen. Agreements aren’t always clear, and the terms can be complex. A breach occurs when one party to a contract fails to meet or uphold its contractual duties. The party that suffers the consequences of this breach may have a cause of action for damages.

In Canada, various statutes govern breach of contract issues, including the Construction Lien Act and Court of Justice Act, Criminal Code, and the Canadian Business Corporations Act. Despite the laws, even the most comprehensive contract doesn’t guarantee that the other party will not breach it. Contract breaches happen daily, and the consequences can be frustrating and costly.

That’s why having the counsel of knowledgeable business lawyers in Toronto is crucial to protect your business rights. They can evaluate the contract and the breach and help you remedy the issue.

How Can a Lawyer Help Me Resolve a Breach of Contract?

Canadian law recognizes the enforceability of written or oral contracts, provided there is a flow of consideration from either party to the agreement or mutuality of promises. Courts must establish the parties’ bargain to determine an objective or show that the parties’ intent existed.

Courts must also determine whether there has been an “offer” and “acceptance” depending on the type and transmission of communication between the parties.

Before commencing a lawsuit for a breach of contract, skilled contract agreement lawyers in Thornhill can help you establish the following:

  • An enforceable contract exists
  • One party breached a term of the contract
  • Whether you suffered actual damages or losses as a result of the breach

Remedies Available in a Breach of Contract Lawsuit

Canadian law provides a multitude of remedies against those who breach contracts. As the aggrieved party, you can use self-help remedies such as set-off contract termination. Alternatively, you can seek redress through the court, where you may be eligible for the following legal remedies depending on your case circumstances:


The most common and usual remedy for a breach of contract will be an award of damages to place the aggrieved party in the same position they would have been if the contract had not been breached.

Damages for hurt feelings and mental distress are not typically awarded. However, courts have shown willingness in the recent past to award punitive damages for certain types of breached contracts, such as employment and insurance.

Equitable Remedies

Canadian courts don’t compel the performance of a contract but can order the specific performance of a contract or issue an injunction to prevent the temporary or permanent breach of a contract.

Additionally, or in place of this type of equitable relief, courts may also award damages, but in different principles from those governing common law damages. This is common in specific contracts, such as distributing licensed goods, entitling the aggrieved party to elect an accounting of the breaching party’s profits.

Liquidated Damages

Depending on the contract type, you can specify a liquidated sum of damages if a contract is breached. The caveat is that the specified liquidated damages cannot be a penalty. You don’t have to prove actual damages if the liquidated damage clause is enforceable. Otherwise, you’d be entitled to damages directly resulting from the breach and consequential damages.

An Experienced Business Lawyer Providing Guidance on Contract Law

Contract law is complex, and working with skilled contract agreement lawyers in Ontario is crucial when drafting an agreement. Since only some agreements are legally binding, a legal expert can review your contracts to ensure they meet the legal threshold. In case of a breach, you can seek legal remedies to compensate you for the resulting loss.

K&Y Law hosts skilled business lawyers to help you evaluate every legal aspect of your business. Whether you need help drafting a contract or enforcing one that already exists, we can provide the legal counsel you need. Call us at 647-559-7935 to schedule an initial case evaluation.