When a contract falls apart, most people assume the solution involves writing a cheque. A vendor fails to deliver goods, a service provider abandons a project halfway through, or a business partner walks away from an agreement, and the wronged party expects to calculate their losses and collect compensation. Damages, after all, represent the default remedy in Canadian contract law, the go-to solution that courts apply in the overwhelming majority of breach situations. Yet there are circumstances where no amount of money can truly make a person whole, where the subject matter of the contract is so distinctive or the harm so particular that only actual performance of the promised obligation will suffice. In these situations, Canadian courts may turn to equitable remedies, the most significant of which are specific performance and injunctions. Understanding when these remedies become available, how they operate in practice, and what they demand of both the party seeking them and the party against whom they are ordered is essential knowledge for anyone running a business, operating a non-profit, or engaging in significant commercial transactions across the country.
The distinction between legal remedies and equitable remedies traces back centuries to the English court system, where separate courts of law and courts of equity operated with different powers and procedures. Courts of law could award damages, monetary compensation calculated to approximate the value of what was lost. Courts of equity, by contrast, could issue orders compelling parties to do or refrain from doing specific things, granting relief that money alone could not accomplish. While Canada long ago merged these separate court systems, the conceptual distinction between legal and equitable remedies remains embedded in our law. Damages remain the primary remedy, available as of right when a breach is proven. Equitable remedies, however, are discretionary. A court is never obligated to grant specific performance or an injunction simply because a contract has been breached. Instead, these remedies are reserved for circumstances where damages would be inadequate, where the balance of convenience favours their imposition, and where no compelling reason exists to deny them.