What damages can
you claim?

By Jonathan Kleiman, Barrister & Solicitor · Published June 2026

"What's it worth?" is the question behind almost every breach of contract dispute. The answer depends on the kind of damages the law lets you claim, how foreseeable your losses were, and — crucially — what you did to limit them after the breach. This guide explains the categories of contract damages recognised in Ontario, the principles courts use to calculate them, and the duty to mitigate that quietly shrinks more claims than any other rule.

What is the purpose of damages for breach of contract?

The purpose of contract damages in Ontario is not to punish the party who broke the deal, but to put the innocent party, as nearly as money can, in the position they would have been in had the contract been performed. Ontario contract law starts from that one guiding principle, and almost everything else flows from it. It is why a court asks "what did you actually lose?" rather than "how badly did they behave?"

What are expectation damages?

Expectation damages are the standard remedy for breach of contract: they give you the benefit you expected from the bargain, putting you where performance would have. They are the starting point in most cases, and in practice they often look like:

• the unpaid contract price for goods delivered or services performed;
• the cost to complete or repair work that was done defectively — the difference between what you paid for and what you got;
• the extra cost of buying elsewhere when a supplier fails to deliver and you have to source replacement goods at a higher price.

If a contractor abandons a $40,000 renovation and it costs you $52,000 to have another firm finish it properly, your expectation loss is the $12,000 difference — the amount needed to get what you were promised.

What are reliance damages?

Reliance damages compensate you for the expenses you reasonably incurred in reliance on the contract that were wasted because of the breach. A court may award them instead of expectation damages where expectation damages are too speculative to calculate — for example, with a new venture whose profits are unknown. The idea is to restore what you spent getting ready to perform, rather than the profit you hoped to make.

What are consequential damages, and when can you recover them?

Consequential (or special) damages are the knock-on losses that flow from a breach — lost profits, lost opportunities, downstream costs — and they are recoverable only if they were reasonably foreseeable. That foreseeability limit has governed contract law since the famous English case of Hadley v Baxendale (1854). Under that rule, you can recover losses that:

1. arise naturally from the breach, in the usual course of things; or
2. were reasonably within the contemplation of both parties at the time the contract was made as a probable result of a breach.

The practical upshot is foreseeability. Unusual or extraordinary losses are only recoverable if the other party knew, when contracting, of the special circumstances that would make them likely. A supplier who is not told that a late delivery will shut down your production line may not be on the hook for the lost production. This is exactly why notifying the other side of what is at stake — in writing — can matter so much later.

Are liquidated damages clauses enforceable in Ontario?

Ontario courts enforce a liquidated damages clause if the pre-agreed sum is a genuine pre-estimate of the anticipated loss, but refuse to enforce it if it is really a penalty. Many contracts try to fix the consequences of a breach in advance with such a clause — a pre-agreed sum payable if a party defaults. A clause is an unenforceable penalty where the amount is set so high, relative to the likely loss, that its purpose is to punish or frighten the other side into performing. If you are relying on (or facing) a liquidated damages clause, whether it is enforceable is a question worth getting a contract dispute lawyer to assess.

What are nominal damages?

Nominal damages are a small, symbolic sum a court awards when a contract was breached but the innocent party suffered little or no actual loss. They recognise the breach without compensating for real harm. Nominal awards confirm you were legally in the right, but they are rarely worth litigating for on their own, and a nominal-damages outcome can affect who pays costs.

Can you claim damages for mental distress in a contract case?

Yes, but rarely — damages for mental distress are available only where an object of the contract was to provide a psychological benefit or "peace of mind" and the distress was within the reasonable contemplation of the parties. Contract damages are usually about money, not feelings — but not always. The Supreme Court of Canada confirmed in Fidler v Sun Life (2006) that damages for mental distress can be available where an object of the contract was to provide a psychological benefit or "peace of mind," and the distress was within the reasonable contemplation of the parties. These cases are the exception, not the rule, and they turn heavily on the nature of the contract. They rarely arise in an ordinary commercial dispute, but they are worth knowing exist.

Can you get punitive damages for breach of contract?

Only rarely — Canadian courts award punitive damages in contract solely where the breaching party's conduct amounts to an independent actionable wrong and is high-handed, malicious, or reprehensible enough to deserve punishment. People often ask whether they can make the other side "pay extra" for behaving badly, but in contract the answer is usually no. Punitive damages are designed to denounce and deter, not to compensate. The independent actionable wrong might be, for example, a breach of a separate duty of good faith. The conduct must be sufficiently high-handed, malicious, or reprehensible to deserve punishment. The leading case, Whiten v Pilot Insurance (2002), involved an insurer's egregious bad-faith handling of a claim. The bar is high, and the vast majority of breaches — even frustrating ones — do not clear it.

Do you have to mitigate your losses after a breach?

Yes — after a breach the innocent party has a duty to take reasonable steps to limit their losses, and a court will cut your damages by any amount you could reasonably have avoided. If there is one rule that surprises people, it is this. You cannot sit back, let the damage pile up, and then bill the breaching party for all of it. The reasonable steps might be re-letting a property, finding a replacement supplier, or accepting reasonable alternative work.

Mitigation does not require you to take unreasonable risks or accept a humiliating deal; it requires reasonable effort. But it is one of the first things a defendant will raise, so document what you did to limit your losses from the moment the breach occurs.

What non-money remedies are available for breach of contract?

Money is the default, but a court can also order specific performance, an injunction, or rescission of the contract.

• Specific performance — a court order requiring the breaching party to actually perform. It is reserved for cases where damages are inadequate because the subject matter is unique, such as a particular piece of real estate.
• Injunction — a court order stopping a party from doing something, often used to enforce restrictive covenants like non-competes.
• Rescission — unwinding the contract and returning both parties to their pre-contract positions, available in defined circumstances such as misrepresentation.

These equitable remedies are discretionary, and in Ontario they generally must be pursued in the Superior Court rather than Small Claims Court. Which remedy fits your situation is a strategic question best worked out with counsel — see our guide to enforcing a contract in Ontario.

Do you get interest and costs on top of a damages award?

Usually — on top of the damages award, a successful party is generally entitled to prejudgment interest and to recover a portion of their legal costs and disbursements from the losing side. A damages award is rarely the whole story. The two add-ons generally break down as:

• Prejudgment interest on the award, running from the date the cause of action arose, at a rate set quarterly under the Courts of Justice Act. Over a multi-year dispute it adds up — you can estimate it with our prejudgment interest calculator.
• Costs — recovery of a portion of legal fees and disbursements from the losing side. For a sense of the total picture of a money claim, our Small Claims Court calculator pulls the pieces together.

How are contract damages calculated and proven?

To recover, you generally have to prove both that the loss was caused by the breach and how much it was — with documents, not estimates. In the real world, the number turns on evidence. That means contracts, invoices, payment records, quotes for replacement work, accounting records for lost profits, and a clear record of your mitigation efforts. A claim that is obviously valid can still be cut down at trial if the loss is not properly documented. Before you commit to litigation, it is worth having a breach of contract lawyer value the claim — and weigh it against whether the other side can actually pay.

What is the difference between contract damages and tort damages?

Contract damages look forward — putting you where you would have been had the promise been kept — while tort damages look backward, putting you back where you were before the wrong. People often blur "damages" into one idea, but the measure differs depending on the type of claim — and the same facts can give rise to both. Tort damages arise, for example, from negligence or negligent misrepresentation.

That distinction can change the number significantly. A misrepresentation that induced you into a deal might be pursued in contract, in tort, or both, and the better measure depends on the facts. Sorting out which claim — and which measure — gives the larger, more provable recovery is part of what a contract lawyer does before a claim is framed.

How are damages measured in common breach scenarios?

The measure changes with the kind of breach — non-payment is usually the unpaid sum plus interest, defective work is the cost of cure (or diminution in value), failure to deliver is the extra cost of buying elsewhere, and a lost deposit is generally recoverable. The principles above land differently depending on the facts:

• Non-payment. The simplest case — the damages are usually the unpaid sum itself, plus interest. For an unpaid invoice or loan, the claim is the debt; the harder questions are often collection and enforcement, not the amount.
• Defective construction or work. Damages are generally the cost of cure — what it costs to put the work right. But where fixing the defect would be wholly disproportionate to the benefit, a court may instead award the diminution in value (how much less the result is worth). Which measure applies is a frequent battleground in renovation and trades disputes — the contractor dispute calculator turns your quotes and payments into an estimate on the cost-of-cure measure.
• Failure to deliver goods. Damages are usually the extra cost of buying equivalent goods elsewhere — the difference between the contract price and the market price you reasonably had to pay.
• A lost deposit. Where you paid a deposit and the other side failed to perform, you are generally entitled to recover it, subject to the terms of the deal and whether any part was a true non-refundable deposit.

How do you prove lost profits?

To recover lost profits you must clear two hurdles: they must have been reasonably foreseeable at the time of contracting, and they must be proven with reasonable certainty, not guessed at. Lost profits are often the largest part of a claim — and the hardest to win. The foreseeability requirement is the second limb of Hadley v Baxendale. Established businesses with a track record have an easier time; brand-new ventures with no history face real scepticism, because their projected profits are speculative. Solid records — past financials, comparable contracts, accounting evidence — are what move a lost-profits claim from "plausible" to "proven."

After a repudiatory breach, should you terminate and sue or carry on?

When a breach is repudiatory you usually face a choice: accept the repudiation, treat the contract as ended, and sue for damages — or affirm the contract, keep it alive, and insist on performance. A repudiatory breach is a material breach or an anticipatory breach. The election has real consequences for what you can recover and for your own ongoing obligations, and it interacts with the duty to mitigate. It is exactly the kind of fork in the road where a quick conversation with counsel before you act pays for itself. Whichever path you choose, watch the clock — see how long you have to sue.

From valuing the claim to recovering on it

A damages figure is the start, not the finish. Once you know what the claim is worth, the path to actually collecting it runs through the same steps as any contract dispute: a demand letter (you can draft one with our demand letter generator), negotiation, and — if needed — a claim in Small Claims Court or, for larger or more complex matters, commercial litigation in the Superior Court. If you do file, it helps to know what happens after a claim is issued. And as always, a strong damages number is only worth pursuing if the other side can actually pay it.

What do reasonable mitigation steps look like in practice?

Mitigation does not require heroics or unreasonable risk — it requires reasonable effort to limit the damage, such as sourcing replacement goods, re-letting space, or taking alternative work. Because the duty to mitigate quietly shapes so many claims, it is worth seeing what it means on the ground:

• A supplier fails to deliver? Source replacement goods within a reasonable time rather than letting your operation sit idle and the losses compound.
• A tenant breaks a lease? Make genuine efforts to re-let the space rather than leaving it empty and billing the former tenant for the whole term.
• A client cancels a contract? Take reasonable alternative work if it is available, rather than treating your calendar as frozen.

You are not required to accept a humiliating deal or take on undue risk, and the burden is on the breaching party to prove you failed to mitigate. But because it is one of the first things a defendant raises, document your efforts from the moment the breach occurs — the calls you made, the replacements you sought, the steps you took. A clear mitigation record protects the full value of your claim.

How do you draft or challenge a liquidated damages clause?

A liquidated damages clause holds up only if the figure is a genuine, good-faith estimate of the anticipated harm at the time the contract is made; a figure wildly out of proportion to any plausible loss is vulnerable to challenge as a penalty. These clauses cut both ways. If you are drafting a contract, a well-built liquidated damages clause can save you the difficulty of proving your loss later. Pluck a number out of the air to scare the other side and you risk the clause being struck down as an unenforceable penalty, leaving you to prove your actual loss the hard way.

If you are facing a liquidated damages clause, the question is the mirror image: is this a genuine pre-estimate, or a disguised penalty? Either way, whether a clause holds up is a fact-specific question worth running past a contract lawyer before you rely on it — or pay it.

Frequently asked questions

What damages can you claim for breach of contract in Ontario?

Most commonly expectation damages — money to put you where you would have been had the contract been performed — plus, where they apply, reliance damages, consequential damages for reasonably foreseeable losses, liquidated damages set out in the contract, and nominal damages. In limited cases the court orders specific performance or an injunction.

What is the difference between expectation and consequential damages?

Expectation damages cover the direct benefit you expected — the unpaid price or the cost to complete the work elsewhere. Consequential (special) damages are further losses that flow from the breach, such as lost profits, recoverable only if they were reasonably foreseeable when the contract was made.

Do I have to mitigate my losses?

Yes. You must take reasonable steps to limit your losses after a breach. If you could reasonably have reduced the loss but did not, the court can cut your damages accordingly. Keep a record of what you did to mitigate.

Can you get punitive damages for breach of contract?

Rarely. Punitive damages require an independent actionable wrong (such as a breach of a duty of good faith) and conduct high-handed enough to deserve denunciation. Ordinary breaches almost never qualify, because contract damages are meant to compensate, not punish.

Does a winning party get interest and costs on top of damages?

Usually. A successful party is generally entitled to prejudgment interest from the date the cause of action arose and can recover a portion of legal costs and disbursements from the losing side — both on top of the damages award.

Talk to a Toronto business lawyer

If a contract has been broken and you want a clear-eyed assessment of what it is worth, call 416-554-1639 or book a free consultation.