Anticipatory Breach of Contract & Limitation Periods | Baker & Company
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We have previously provided a general overview with respect to limitation periods in litigation. It is well established that the general limitation period extends for two years once a claim has been discovered, but when does the limitation period begin to run on a claim for anticipatory breach of contract? When does the clock start to run if there is no breach, but the Plaintiff has been made aware that a breach is imminent? This question was addressed by an Ontario court in a recent decision.

Changes to Commercial Property Impacted Plaintiff’s Business

The Plaintiff owned a commercial car wash operation in London, Ontario, and leased the property where the car wash was located from the Defendant. In addition to the car wash, the property contained other businesses including a gas station, a convenience store and a coin-operated car wash facility (this was separate from the Plaintiff’s business, which provided an automatic wash as well as interior car detailing services). The Defendant began to redevelop the land surrounding the car wash and demolished the gas bar, coin-op car wash and the convenience store. The Defendant also obtained site plan approval from the city to construct commercial buildings on the property to house various retail businesses.

The construction of one building on the property, as well as the addition of garbage dumpsters in front of the car wash, had reduced the visibility of the car wash from the main road.

The lease between the Plaintiff and the Defendant contained the following clause:

… the Lessor shall have the right to alter or modify the parking lot or the means of ingress or egress thereto provided that such alteration or modification shall not impede or limit any access to or from the leased premises nor will it divide or separate in any way the leased premises from any part of the Lessor’s lands, and further provided that any such alteration or modification shall not affect the marketability or potential marketability of the Lessee’s product from the leased premises in any adverse way; [Emphasis added]

The Plaintiff alleged that there had been a drop in the number of cars at the car wash, and largely attributed the change to the modifications made by the Defendant. In particular, the Plaintiff said that the reduced visibility of the car wash from the road had negatively impacted the number of cars the business had been servicing in the years following the changes.

Plaintiff Discovered the Potential Breach More Than 2 Years Before Bringing Action

The Plaintiff was made aware of the Defendant’s plan to construct a new building on the property in 2013. In response, the Plaintiff wrote a letter to the Defendant saying that this would block visibility of the car wash from the road and requested that the plans for the building be abandoned. The Defendant responded in early 2014, saying that they would be going ahead with their plans for construction. In addition to the planned buildings, the Defendant installed two garbage dumpsters in front of the entrance to the car wash in 2014 and constructed a concrete pad adjacent to the car wash in the same year. This also had the effect of reducing the visibility of the car wash from the main road.

The Plaintiff sought damages for the reduction in car count at their business owing to the loss of visibility and the Defendant defended on the grounds that the action was statute-barred. The discovery of the planned construction occurred in 2013, and the other incidents had taken place throughout 2014. The Plaintiff brought the action in February of 2016. The Defendant claimed this was outside of the 2-year limitation period.

The Defendant specifically claimed that the letter from the Defendant’s lawyer, dated January of 2014, constituted an anticipatory breach of the commercial lease and therefore the clock started to run on that date. However, the court held that:

[A] claim is not necessarily discovered when a party commits an anticipatory breach of contract as the innocent party may choose to treat the contract at an end and sue for damages, or it may treat the contract as subsisting and continue to press for performance of the contract and bring an action once the promised performance fails to materialize

In the case at hand, the Plaintiff chose to treat the contract as not yet breached and continued to perform its duties under the contract while pressing the Defendant to abandon the plans that would negatively impact the Plaintiff’s business. Given that, the complaint didn’t arise until the Plaintiff had experienced the reduction in car count, somewhere within the two-year limitation period.

This case should be of some comfort to parties concerned that advance knowledge of a potential breach may preclude them from seeking damages in court. However, it is always best to speak with an experienced lawyer as soon as possible to properly ascertain your position with respect to litigation and ensure that you are fully aware of any time limitations you may face when it comes to commencing an action. While limitation periods may seem cut and dry, as evidenced by this case, they can actually be quite complex depending on the specific circumstances involved.

At Baker & Company, our Toronto commercial real estate and litigation lawyers take the time to meet with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of transactions, or through litigation. Call us at 416-777-0100 or contact us online for a consultation.

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