Clients often ask lawyers what happens when a contract is not completed on time. Sometimes, a client may want or need to delay performance. Other times, a client may have to deal with the potential ramifications of the other party's failure to perform their contractual obligations in a timely fashion. Where a contract specifies a fixed completion date and consequences for not meeting this deadline, these terms will be considered. However, not all contracts are specific on these points.
The Ontario Court of Appeal's key rulings on timeliness in contracts
In 2533619 Ontario Inc. (Calibrex Development Group) v. Lucadamo, 2024 ONCA 536 ("Calibrex"), the Ontario Court of Appeal (the "OCA") recently provided important insights into what happens when a contract does not include a specific completion date, ruling that:
- A reasonable timeframe will be assumed. If a contract does not set a specific deadline, the law implies that the work must be completed within a "reasonable time."
- Reasonableness depends on the case. What counts as "reasonable" depends on the unique circumstances, including the nature of the project, timelines expected, and other factors.
- Good faith is required. Each party must take the necessary steps to fulfill the contract.
The parties in Calibrex had agreed to a closing date for the sale of certain land as 30 days following receipt of severance approval by the municipality. The agreement included a 'time is of the essence' clause and provided that the time for satisfying any obligation could be extended by further agreement. The purchaser was required to obtain the severance. The vendor provided additional time to do so. The sale was expected to close in 2018. The purchaser did not, however, take any steps to obtain the severance until about 2022, at which time the vendor took the position that the agreement was at an end.
The OCA held that by the time the purchaser had started to take the required steps in 2022, they were already in breach of the agreement. The OCA confirmed that the vendor had no obligation to provide reasonable notice of termination or a deadline to obtain the severance. The OCA also rejected the purchaser's argument that the vendor had acquiesced to the purchaser's delay.
On the issue of notice, the OCA considered Stamm v. Ratz, [1990] 37 C.L.R. 233 (Ont. Dist. Ct.), an earlier case about providing reasonable notice of a deadline for completion. The OCA left it open that in some situations it may be necessary for reasonable notice of a deadline for completion to be provided, but that it is not a prerequisite for relief in every case.
Unfortunately, there is no information available about the reasons for delay in Calibrex. It is, therefore, difficult to predict how future cases may be decided where reasonable notice of a deadline for completion is in issue. Generally, reasonable notice of termination or a deadline for completion, will be considered along with other factors, including the relationship between the parties, their reasonable expectations, and the length and any explanation for the delay.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
