Duhaime's Law Dictionary


Fundamental Breach Definition:

Contract law:

Related Terms: Anticipatory Breach, Breach of Contract

In this area of contract law, Canadian courts, merely following the gymnastics of the Supreme Court of Canada, who greatly struggled to edefine ore articulate any clear rules in which the doctrine of fundamental breach might apply. Studying Canadian case law on fundamental breach of contract is like listening to the sound of a person scratching a chalkboard.

But at least, this, from Tercon, at ¶106:

"This doctrine (of fundamental breach) was largely the creation of Lord Denning in the 1950s (see, e.g., Karsales (Harrow) Ltd. v. Wallis.  It was said to be a rule of law that operated independently of the intention of the parties in circumstances where the defendant had so egregiously breached the contract as to deny the plaintiff substantially the whole of its benefit.  In such a case, according to the doctrine, the innocent party was excused from further performance but the defendant could still be held liable for the consequences of its “fundamental” breach even if the parties had excluded liability by clear and express language. "

In Mantar Holdings (British Columbia Court of Appeal:

"Although circumstances constituting a fundamental breach of contract may sometimes also constitute a repudiation of the contract, the doctrines of fundamental breach and repudiation are distinct.

"A fundamental breach of a contract occurs where the failure of one of the contracting parties to perform a primary obligation under the contract has the effect of depriving the other party of substantially the whole benefit which the parties intended that party to receive (see Hunter Engineering Co. v. Syncrude). Repudiation occurs when a party to the contract, either by words or conduct, evinces an intention not to be bound by the contract: (see Guarantee v. Gordon Capital Corp at ¶40).

The remedy for fundamental breach and repudiation is effectively the same – the innocent party may elect to terminate the contract or to accept the repudiation bringing the contract to an end. In either case, the parties are discharged from future obligations under the contract, and the innocent party may look to the other party for damages. "

References and Citations

  • Karsales (Harrow) Ltd. v. Wallis, [1956] EWCA Civ 4. Also published at [1956] 2 All ER 866, and also at 1 W.L.R. 936 [1956]. Available online and access on the Internet on October 9, 2014 and the following then active URL: http://www.bailii.org/ew/cases/EWCA/Civ/1956/4.html
  • Guaranty Company of North America v. Gordon Capital Corporation, [1999] 3 SCR 412, Access successively from the Internet on October 9, 2014, at the following URLwww.canlii.org/en/ca/scc/doc/1999/1999canlii664/1999canlii664.html.
  • Hunter Engineering Co. v. Syncrude Canada Ltd, [1989] 1 S.C.R. 426, at p. 462. This case was retrieved from the Internet successfully at the following URL, www.canlii.org/en/ca/scc/doc/1989/1989canlii129/1989canlii129.html, on October 9, 2014
  • Mantar Holdings Ltd. v. 0858370 B.C. Ltd., 2014 BCCA 361 (available on the Internet at least on Oct. 9, 2014, at www.canlii.org/en/bc/bcca/doc/2014/2014bcca361/2014bcca361.html}.
  • Tercon Contractors Ltd. v. British Columbia, 2010 SCC 4 (available on the Internet at https://www.canlii.org/en/ca/scc/doc/2010/2010scc4/2010scc4.html, accessed on October 9, 2014.

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