What happens if a contract becomes impossible to perform in Ontario?
When an unforeseen event makes performance of a contract radically different from what was agreed — or outright impossible — Ontario courts may find the contract frustrated. Frustration discharges both parties from their obligations going forward. Neither side is in breach; the contract simply ends.
Classic examples include destruction of the specific subject matter of the contract, supervening illegality (a new law makes performance illegal), or events that render performance fundamentally different from anything the parties contemplated. Courts set a high bar — a contract is not frustrated simply because performance became harder or more expensive than anticipated.
Ontario's Frustrated Contracts Act governs what happens to money already paid or owed when a contract is frustrated. It allows courts to adjust payments to prevent unjust enrichment rather than leaving one party stuck with all the loss.
Many contracts also include force majeure clauses that list specific triggering events (strikes, natural disasters, etc.) and prescribe what happens. These are separate from the common law doctrine of frustration and are interpreted according to their specific language. If you are dealing with a situation where performance has become impossible, whether due to a force majeure event or otherwise, legal advice is recommended to clarify your rights and obligations.
Key takeaways
- Frustration discharges both parties when performance becomes radically impossible or different.
- The bar is high — increased cost or difficulty alone is not frustration.
- Ontario's Frustrated Contracts Act adjusts financial consequences when frustration occurs.
- Check your contract for a force majeure clause, which may have different rules.