Contract Termination: Considerations in Terminating for..., 2021 J. Can. C....
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*69 Importantly, the Court in Contura also clarified that a party delivering a notice of default
cannot thereafter justify its termination of the contract on the basis of breaches of contract that
were not accurately and clearly specified in the notice of default.
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In Urbacon, discussed above,
Guelph sought to validate an insufficient notice of default on the basis of deficiency lists that were
prepared after it delivered the impugned notice of default to Guelph.
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In rejecting the argument
that deficiency lists created after termination could be used to justify the sufficiency of the notice
of default, the Court provided further support for the proposition that notices of default cannot be
buttressed by evidence after the fact.
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The trial judge in Contura then went on to explain the significant consequences of delivering a
notice lacking the clarity required by law: “The result of delivering an improper notice is that
the time period set out in the notice never begins to run, and the termination by the delivering
party at the end of that period is wrongful.”
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Contura also stands for the proposition that, from
a procedural perspective, the party delivering the notice of default bears the burden of proof of
clearly identifying the breaches upon which it relies, rather than the receiving party being required
to satisfy the court that it failed to understand the notice.
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The facts in Contura, on the issue of the notice of default, were are as follows. On January 6, 2015
Contura Building Corporation, the design-builder, delivered a formal notice of default to 0772551
Ltd., the owner, pursuant to GC 7.2.3.4 of the CCDC 14. The notice described various issues of
default in relation to the owner's failure to: (1) produce a complete geotechnical report; (2) provide
requested information in relation to a conservation permit and letter of authorization in a timely
manner; and (3) pay progress claims when due. The notice also confirmed that the owner had five
working days to correct such defaults or the design-builder might suspend or terminate. The owner
took no steps to resolve any of the issues and did not respond to the request for a meeting. The
design-builder gave notice of termination on January 26, 2015, on the basis that the owner had
failed to cure the defaults set out in the notice of default.
*70 When the trial judge applied the requirements outlined above to the circumstances at hand, he
concluded that the notice of default was clear and unambiguous. The reference to the geotechnical
report clearly referred to the owner's failure to provide a final version of a preliminary report--
something it had agreed would be done--and the reference to a failure to pay progress claims when
due was also clear as the due date for one of the progress draws had come and gone by the date
the notice was delivered.
The decision in Kingdom (cited in Contura) can provide some further factual context as to
how courts interpret and apply the requirements for a notice of default. Kingdom illustrates the
importance of clarity and precision when noting a party in default and subsequently terminating
the contract. In Kingdom, the contractor (“Kingdom”) entered into a fixed price contract with