Anticipatory Breach

Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576 (CanLII)

[42] Repudiation occurs by the words or conduct of one party to a contract that show an intention not to be bound by the contract: Guarantee Co. of North America v. Gordon Capital Corp., 1999 CanLII 664 (SCC), (1999) 3 S.C.R. 423, at para. 40. Anticipatory repudiation is essentially the same as repudiation simpliciter – the only difference is timing. In her treatise, Canadian Contract Law, 3d ed. (Markham: LexisNexis Canada, 2012), at p. 618, Angela Swan begins her discussion of anticipatory repudiation by helpfully outlining the circumstances in which this issue typically arises:

The phrases “anticipatory breach” or “anticipatory repudiation” refer to the situation created when, before the time of performance has arrived, one party to a contract tells the other, either explicitly or as an inference from something said or done by the party, that, despite having no justification for its position, it is no longer prepared to perform its obligations under the contract. The statement may be made in a letter by one party’s solicitor to the other, by an oral statement by a party himself or herself to the other, or in any form of communication. [Emphasis added. Citations omitted.]

[43] Recently, in Potter v. New Brunswick (Legal Aid Services Commission), 2015 SCC 10, 381 D.L.R. (4th) 1, at para. 149, Cromwell J. (concurring) wrote this about anticipatory repudiation: “The focus in such cases is on what the party's words and/or conduct say about future performance of the contract. For example, there will be an anticipatory repudiation if the words and conduct evince an intention to breach a term of the contract which, if actually breached, would constitute repudiation of the contract.”

[44] Accordingly, the same principles guide both anticipatory repudiation and repudiation. Courts often use the terms interchangeably because alleged repudiations frequently occur “before the time of performance has arrived” (to borrow Swan’s phrasing).

[45] The test for anticipatory repudiation is an objective one: S.M. Waddams, The Law of Contracts, 6th ed. (Toronto: Canada Law Book, 2010), at para. 620. As Gillese J.A. wrote for this court in Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 88 O.R. (3d) 721, at para. 37: “To assess whether the party in breach has evinced such an intention [to repudiate the contract], the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it.”

[46] In objectively construing the purported breaching party’s intention, the surrounding circumstances must be considered. In White v. E.B.F. Manufacturing Ltd., 2005 NSCA 167, 239 N.S.R. (2d) 270, Saunders J.A. wrote, at para. 89: “Proof of such an intention requires an investigation into the nature of the contract, the attendant circumstances, and the motives which prompted the breach.”Earlier this year, Cromwell J., in his concurring opinion in Potter, confirmed the importance of considering the surrounding circumstances. At para. 164, Cromwell J. wrote: “As Lord Scarman put it in Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd., [1980] 1 All E.R. 571 (H.L.), at p. 590, the trial judge and the Court of Appeal in this case were ‘concentrating too much attention on one act isolated from its surrounding circumstances and failing to pay proper regard to the impact of the party's conduct on the other party’.”

Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA

[37] An anticipatory breach sufficient to justify the termination of a contract occurs when one party, whether by express language or conduct, repudiates the contract or evinces an intention not to be bound by the contract before performance is due. See Pompeani v. Bonik Inc. (1997), 1997 CanLII 3653 (ON CA), 35 O.R. (3d) 417, (1997) O.J. No. 4174 (C.A.). To assess whether the party in breach has evinced such an intention, the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it. See McCallum v. Zivojinovic (1977), 1977 CanLII 1151 (ON CA), 16 O.R. (2d) 721, (1977) O.J. No. 2341 (C.A.). …[I]n determining whether the party in breach had repudiated or shown an intention not to be bound by the contract before performance is due, the court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract.

Place Concorde East Limited Partnership v. Shelter Corporation of Canada, 2006 CanLII 16346 (ON CA)

[50] Thus, a repudiatory breach does not automatically bring an end to a contract. Rather, it confers a right upon the innocent party to elect to treat the contract at an end thereby relieving the parties from further performance. As a general rule, the innocent party must make an election and communicate it to the repudiating party within a reasonable time: see Chapman v. Ginter 1968 CanLII 72 (SCC), (1968) S.C.R. 560 at 568. However, in some cases the election to treat the contract at an end will be found to have been sufficiently communicated by the innocent party’s conduct: John D. McCamus, The Law of Contracts, (Toronto: Irwin Law Inc., 2005) at pp. 641-42.