Damages for Breach of Contract in Ontario: What You Can Recover

When someone breaks a contract in Ontario, the law does not leave the injured party without recourse. Courts have developed a range of remedies designed to put the wronged party back in the position they would have occupied had the contract been performed. Understanding what damages for breach of contract Ontario courts can award — and how they are calculated — helps you know what to expect before you spend time and money on a lawsuit.

This article walks through the main remedies available for breach of contract claims in Ontario: compensatory damages (the most common), specific performance, injunctions, and the rare cases where aggravated or punitive damages apply.

Compensatory Damages: The Starting Point

The default remedy for breach of contract is an award of money designed to compensate the innocent party. Ontario courts measure compensation in one of two ways, depending on what the claimant can prove.

Expectation Damages (Putting You Where You Would Have Been)

Expectation damages are the most common form of contract award. The goal is to give the plaintiff the benefit of the bargain — the economic position they would have reached if the contract had been fully performed.

A straightforward example: You hire a contractor to renovate your kitchen for $40,000. The contractor abandons the job halfway through and you must hire a replacement for $55,000 to finish the work. Your expectation damages are $15,000 — the extra cost you incurred because the contract was broken.

Courts assess expectation damages at the time of breach, not at the time of trial. When calculating how to measure contract damages in Ontario, judges look at:

• The market value of the promised performance vs. what was actually delivered
• Lost profits that were a reasonably foreseeable consequence of the breach
• Costs of cure (the cost to fix defective work or find a replacement)
• Loss of a chance, in some cases, where a lost opportunity had a quantifiable value

Losses must not be too remote. The leading rule is that a breaching party is only liable for losses that arise naturally from the breach or that were within the reasonable contemplation of both parties when the contract was made.

Reliance Damages (Recovering Wasted Expenditure)

Sometimes a plaintiff cannot prove what profit they would have made — for instance, if the contract involved a new business venture with no track record. In those cases, courts may award reliance damages instead: reimbursement for expenses the plaintiff incurred in preparation for or in performance of the contract, which are now wasted because of the breach.

Reliance damages are not a free pass. If the defendant can show that the plaintiff would have lost money on the contract even if it had been performed, reliance damages will be reduced accordingly.

Non-Monetary Remedies

Money does not always make a plaintiff whole. Ontario courts can grant two additional remedies when damages are inadequate.

Specific Performance

Specific performance is a court order requiring the defendant to carry out their contractual obligations. It is an exceptional remedy, awarded only when monetary compensation would be inadequate to remedy the harm. The classic case is a contract to purchase land or a unique piece of property — because every parcel of real estate is considered unique, damages cannot perfectly substitute for the thing promised.

Courts will generally refuse specific performance if:

• The contract requires ongoing personal services (courts will not supervise a continuing relationship)
• The plaintiff delayed unreasonably in bringing the claim
• The defendant would suffer severe hardship disproportionate to the benefit to the plaintiff
• The plaintiff's own conduct has been inequitable

Injunctions

An injunction is a court order compelling or prohibiting specific conduct. In a contract context, injunctions are most commonly sought to enforce a negative covenant — for example, a non-solicitation clause in a commercial agreement, or a covenant not to compete. Rather than forcing the defendant to perform a positive obligation, the court restrains them from doing something they promised not to do.

Interim or interlocutory injunctions can be obtained on an urgent basis before a full trial. The applicant must generally show there is a serious issue to be tried, that they would suffer irreparable harm without the order, and that the balance of convenience favours granting the relief.

Aggravated and Punitive Damages: The Exception, Not the Rule

Ontario contract law is built on the principle of compensation, not punishment. Two exceptional categories of damages depart from that principle, but courts apply them sparingly.

Aggravated Damages

Aggravated damages compensate for intangible harm — mental distress, humiliation, or injury to dignity — caused by the manner in which the breach was carried out. They remain compensatory in nature but go beyond pure financial loss.

In contract cases, aggravated damages are rarely awarded. Courts have sometimes granted them where the contract was one whose very purpose was to provide peace of mind (a home security contract, for example), and the breach destroyed that peace of mind in a particularly harmful way.

Punitive Damages

Punitive damages are awarded not to compensate the plaintiff but to punish the defendant and deter similar conduct. In a contract dispute, Ontario courts require something more than a simple breach: the defendant's conduct must be independently actionable (often as a tort, such as fraud or intentional infliction of harm) and must be so harsh, vindictive, or reprehensible that punishment is warranted.

Punitive damages in contract litigation are rare and typically modest even when granted. Do not count on them in an ordinary commercial dispute.

How Damages Are Calculated in Practice

Calculating damages in an Ontario contract claim involves several practical steps:

1. Identify the baseline — what performance was promised, and what was delivered?
2. Quantify the gap — market evidence, invoices, expert opinions, and financial records all help establish the value of the shortfall.
3. Account for mitigation — the plaintiff must have taken reasonable steps to reduce their losses. Damages will be reduced to the extent the plaintiff failed to mitigate (see our companion article on the duty to mitigate).
4. Apply foreseeability — strip out losses that were too remote at the time the contract was made.
5. Add pre-judgment interest — Ontario's Courts of Justice Act provides for pre-judgment interest at a rate set by regulation (verify the current rate, as it changes).

Frequently asked questions