A broken contract is one of the most common legal problems BC businesses face. Understanding what constitutes a breach, what remedies are available, and when to act can make the difference between recovering your losses and writing them off.
## Contracts Are the Foundation of Business
Every BC business runs on contracts — supplier agreements, client retainers, service contracts, employment agreements, commercial leases, shareholder agreements. When the other party does not perform as agreed, the consequences can range from a minor inconvenience to a serious financial loss.
Understanding what constitutes a breach of contract, what remedies BC law provides, and how to protect yourself — before and after a breach — is essential practical knowledge for any business owner.
## What Is a Breach of Contract?
A breach of contract occurs when one party to a valid contract fails to fulfil their obligations under it without a lawful excuse. BC contract law, rooted in common law and refined by decades of BC Supreme Court and Court of Appeal decisions, recognises several types of breach:
### Material Breach
A material breach goes to the heart of the contract — it defeats the purpose for which the contract was made. If you hired a contractor to build a commercial space to specified standards and they delivered something that cannot be used for its intended purpose, that is a material breach. A material breach entitles the innocent party to treat the contract as terminated and claim damages.
### Minor (Partial) Breach
A minor breach involves a failure that does not defeat the purpose of the contract but causes some loss. The innocent party is entitled to damages but cannot typically treat the contract as terminated. For example, a supplier who delivers goods a week late but otherwise performs may be liable for losses caused by the delay but has not committed a material breach.
### Anticipatory Breach
An anticipatory breach occurs when one party makes clear — through words or conduct — that they will not perform their obligations before performance is due. The innocent party does not have to wait for the deadline to pass; they can treat the contract as terminated immediately and begin mitigating their losses.
### Repudiatory Breach
Repudiation is when a party clearly refuses to perform or acts in a way that makes performance impossible. Like anticipatory breach, the innocent party can accept the repudiation and terminate the contract, or affirm it and hold the other party to their obligations.
## What You Must Prove
To succeed in a breach of contract claim in BC, you generally must establish:
1. A valid contract existed — offer, acceptance, consideration, and intention to create legal relations
2. The contract obligated the defendant to do (or not do) something specific
3. The defendant failed to perform that obligation
4. You suffered a loss as a result
The terms of the contract — written or oral — are central. Written contracts are much easier to enforce because the obligations are clear. Oral contracts are enforceable in BC but proving their terms depends on witness evidence, which is inherently uncertain.
## Remedies for Breach of Contract in BC
### Damages
The primary remedy for breach of contract is damages — monetary compensation for your loss. BC courts aim to put the innocent party in the position they would have been in had the contract been performed. This means:
Expectation damages — the profit or benefit you expected to receive under the contract but did not because of the breach.
Reliance damages — expenses you incurred in reliance on the contract that are now wasted because the other party did not perform.
Consequential damages — losses flowing naturally from the breach, such as lost profits from downstream contracts that depended on the breached contract. These must have been reasonably foreseeable at the time the contract was made.
### Mitigation
Critically, BC law requires the innocent party to mitigate their loss — you cannot simply sit on your hands and let damages accumulate. You must take reasonable steps to reduce your loss. A failure to mitigate can reduce your damages award.
### Specific Performance
In rare cases — typically involving unique goods or real property — a court may order specific performance, requiring the breaching party to actually perform the contract rather than simply pay damages. This remedy is discretionary and courts are reluctant to grant it where damages would be an adequate remedy.
### Injunction
A court may grant an injunction to prevent an ongoing or threatened breach — for example, to stop a former employee from violating a non-solicitation clause or to prevent disclosure of confidential information.
### Limitation Periods — Do Not Wait
In BC, the *Limitation Act* SBC 2012, c 13, imposes a two-year limitation period from the date you discovered (or ought to have discovered) the breach. If you do not commence a legal proceeding within that window, your claim is barred — regardless of how strong it is. This is not a technicality to work around later; it is a hard deadline. Seek legal advice promptly when you suspect a breach.
## Before You Sue — Practical Steps
Review the contract carefully. What exactly did the other party agree to do? What are the conditions, exceptions, and dispute resolution provisions? Many contracts contain mandatory mediation or arbitration clauses that must be followed before litigation.
Send a formal demand. A well-drafted lawyer's letter setting out the breach, the losses claimed, and a deadline for response often resolves disputes without litigation. It also puts the other party on notice and establishes the timeline of your claim.
Gather your evidence. Contracts, correspondence, invoices, delivery records, internal communications, third-party quotes, financial records — everything that documents what was agreed, what happened, and what it cost you.
Calculate your actual losses. Courts do not award speculative damages. You need to be able to quantify and prove your loss. This may require expert evidence, particularly for lost profits or complex business valuations.
Consider proportionality. Litigation is expensive. BC Small Claims Court handles matters up to $35,000 without needing a lawyer. BC Civil Resolution Tribunal handles disputes up to $5,000 online. The BC Supreme Court handles larger commercial claims. The right forum depends on the size of your claim and the complexity of the issues.
## Defending Against a Breach of Contract Claim
If you are on the receiving end of a breach of contract allegation, you may have legitimate defences:
- The contract is invalid — lack of consideration, duress, misrepresentation, or incapacity at formation
- You did not breach — the other party's interpretation of the contract is wrong
- The other party waived the breach — their conduct amounted to an acceptance of your performance
- The other party also breached — their own breach released you from your obligations
- The losses are not caused by your breach — the chain of causation is broken
- The claimed damages were not mitigated — the other party failed to reduce their loss
## How Contracts Can Be Better Drafted to Prevent Disputes
The most cost-effective way to deal with a breach of contract is to prevent the dispute from arising in the first place:
- Define obligations precisely — vague terms invite disagreement
- Include clear milestones, payment terms, and what happens if they are missed
- Specify a dispute resolution process — negotiation, then mediation, then arbitration
- Include limitation of liability clauses where appropriate
- Ensure your standard contracts are reviewed by a lawyer familiar with BC commercial law
## How Sea to Sky Law Can Help
Andrew Liggett has 35 years of experience advising BC businesses on contract drafting, negotiation, and dispute resolution. Whether you need a contract reviewed before you sign, a breach assessed, a demand letter drafted, or representation in mediation, arbitration, or court, early legal advice almost always produces a better outcome.
Generally two years from the date you discovered or ought to have discovered the breach, under BC's Limitation Act. There are some exceptions, but waiting is always risky. Seek legal advice as soon as you suspect a breach.
Yes. Oral contracts are enforceable in BC. The challenge is proving the terms, which depends on witness evidence and surrounding circumstances rather than a written document. Written contracts are always preferable for this reason.
BC Small Claims Court handles claims up to $35,000 and is designed to be accessible without a lawyer. The BC Supreme Court handles larger claims and more complex matters. The right choice depends on your claim amount, the complexity of the issues, and whether the contract has a mandatory arbitration clause.
Partial recovery of legal costs (called 'party-and-party costs') is typically awarded to the successful party in BC Supreme Court, but they rarely cover your full legal fees. Small Claims Court has very limited cost awards. This is why proportionality — weighing the cost of litigation against the likely recovery — matters.