A Commentary on Recent Legal Developments by the Opinions Group
of McCarthy Tétrault LLP
Does silence and inaction in the face of a contractual breach
constitute acceptance of the contractual repudiation? This is
the issue which confronted the Ontario Court of Appeal in its
recent decision in Brown v. Belleville (City).
The facts of the decision in Brown are, briefly, as follows.
Decades ago, the Township of Thurlow, which subsequently
amalgamated with the City of Belleville (the "City"),
entered into an agreement with a farmer undertaking to perpetually
maintain and repair a storm sewer drainage system on the
farmer's land (the "Agreement"). The land in question
was sold to third parties called the Pleizers. The Pleizers
attempted in 1980 to enforce the Agreement. The City disavowed any
obligations under the Agreement. The Pleizers took no further
positive steps to enforce the Agreement against the City.
In 2003, the Pleizers sold the land to the Browns. The
Browns then requested the City in 2004 to honour its obligations
under the Agreement. The City refused to do so. Neither the
Pleizers nor the Brown acted in way that was inconsistent with the
Agreement. The Browns ultimately sued the City in 2011
seeking specific performance of the Agreement or damages for its
breach. The City then asserted that the Browns' claim was
barred by the expiry of a governing limitation period, arguing that
the claim for breach of contract would have crystallized when it
first refused to honour the Agreement back in 1983 (or, at the
latest, in 2004).
In this context, the Court of Appeal revisited and clarified the
governing principles of repudiation. To begin with, the Court
stated that "[a] repudiatory breach or an anticipatory
repudiation of contract does not, in itself, terminate or discharge
a contract." Rather, the innocent party has an election
to make in the face of such a repudiation. It can disaffirm or
affirm the contract. "Acceptance" of the
repudiation means that an election has been made to disaffirm the
contract. In such a case, the contract is terminated. Rejecting the
repudiation, on the other hand, means that the contract continues
The Court went on to state that:
"[W]here the innocent party to a repudiatory breach or an
anticipatory repudiation wishes to be discharged from the contract,
the election to disaffirm the contract must be clearly and
unequivocally communicated to the repudiating party within a
The Court did, however, acknowledge that "[c]ommunication
of the election to disaffirm or terminate the contract may be
accomplished directly, by either oral or written words, or may be
inferred from the conduct of the innocent party in the particular
circumstances of the case."
Significantly, the Court went on to note that silence or
inaction in the face of a repudiation will generally fall short of
satisfying the requirement of clear and unequivocal communication
to the repudiating party of the adoption of the repudiatory
breach. The Court, in contrast, noted that "overt"
actions by an innocent party may in some circumstances constitute
acknowledgement that the repudiated contract has been
terminated. Moreover, the Court stated that "the burden
to establish the acceptance the repudiation of a contract is on the
party asserting acceptance".
Curiously, and somewhat inconsistently, the Court of Appeal went
on to indicate that despite the lack of evidence indicating that
the repudiation of the Agreement had been accepted, it was
nevertheless possible for the City to argue that the Agreement had
been mutually abandoned – an argument which was left to be
determined for another day.
The decision in Brown nevertheless clarifies that mere inaction
in the face of a repudiatory breach of a contract does not amount
to acceptance of the repudiation. Although acceptance can be
indicated by conduct, the conduct must generally entail positive
action which clearly and unequivocally communicates such
The Court's ruling in Brown also raises interesting issues
regarding privity of contract, which will be addressed in a future
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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