Silence is Not Termination: The Risk of Doing Nothing
The following case decision is a cautionary tale for any party confronted with an anticipatory breach or repudiation of a contract—in layman’s terms, when it becomes clear before the end of the contract terms that one party will not fulfill their side of the agreement. These principles were recently applied by the Ontario Superior Court of Justice in Caivan (Creekside) Limited Partnership et al. v. Logoteta et al.,[1] a summary judgment decision involving a failed pre-construction real estate transaction.
A mere acknowledgement of repudiation, or even an internal belief that the agreement is over, is insufficient. Unless the non-repudiating party clearly communicates its acceptance of the repudiation within a reasonable time, the contract remains in force. As this case illustrates, silence can have serious and costly consequences.
Although the dispute arose in a residential real estate context, the Court’s reasoning has broad application across commercial agreements. In particular, it carries important lessons for franchise systems and supply or distribution relationships, where franchisors, franchisees, and suppliers frequently confront defaults, payment issues, and threatened non-performance.
The Facts
In June 2022, the defendants entered into an agreement of purchase and sale with the plaintiffs to buy a pre-construction townhouse in Oakville for approximately $3.31 million, with completion anticipated in July 2024. The defendants paid an initial deposit of $100,000 but failed to make subsequent required payments in August and October 2022, due to difficulties selling their home in the United Kingdom.
The plaintiffs granted an extension to November 10, 2022, warning that failure to pay could result in termination. On November 8, 2022, the plaintiffs advised that if payments were not made by 5 p.m. on November 10, they “will move to terminate the Purchase Agreement and all deposits shall be forfeited.” However, the plaintiffs also stated that if the defendants later became able to make payment and the house remained available, they were “willing to consider in good faith reviving the transaction,” including crediting the forfeited deposits towards the purchase.
The payments were not made by the deadline. Despite their prior warnings, the plaintiffs took no steps to actually terminate the agreement or communicate any acceptance of the defendants’ repudiation.
Several months later, in March 2023, while the agreement remained technically in force, the plaintiffs resold the property to a third party at a lower price. When the defendants subsequently inquired about reviving the transaction, the plaintiffs asserted that the agreement had already been terminated and sought damages. The defendants countered that the resale constituted a breach and demanded the return of their deposits.
The Decision
The Court reaffirmed the settled law on anticipatory breach repudiation does not terminate a contract unless and until the innocent party clearly accepts it. While acceptance may be communicated expressly or inferred from conduct, it must be clear, unequivocal, and communicated within a reasonable time.
The plaintiffs relied on Cachet Summerhill Developments Inc. v. Kaznlson,[2] where the Court termination based on mandatory and unequivocal language stating that the agreement “shall be declared null and void” unless performance occurred. In contrast, the communications in this case fell short.
Here, the plaintiffs’ October 31 and November 8, 2022 letters did not effect termination. Statements that the vendor “shall have the right” to terminate, or “will move to terminate,” contemplated future steps rather than an immediate and final election. Further, by expressly inviting the defendants to revive the transaction if payment later became possible, the plaintiffs affirmed the contract.
When the defendants failed to pay on November 10, 2022, the plaintiffs were required to make a fresh election, either to terminate or to continue with the agreement. They did neither. Their silence meant the repudiation went unaccepted and the contract remained alive.
By reselling the property in March 2023, the plaintiffs rendered themselves incapable of performing the agreement. In doing so, the “tables turned”: the plaintiffs became the breaching party. The Court held that the defendants were therefore entitled to the return of their deposits, with interest.
Why This Matters for Franchise and Commercial Relationships
This decision carries particular significance for franchise systems. Franchisors often grant indulgences, extensions, temporary forbearance, or informal accommodations to struggling franchisees or suppliers. While commercially understandable, such indulgences can inadvertently affirm the contract and eliminate the ability to later rely on an earlier repudiation.
Similarly, communications that reserve rights, threaten future termination, or continue to press for performance may prevent a franchisor (or franchisee) from later asserting that the agreement was already at an end. In commercial relationships failing to clearly accept repudiation can expose parties to unexpected liability.
Key Takeaways
At the core of the decision is a long-established principle of contract law: a repudiatory breach does not, by itself, bring a contract to an end. Termination depends not on the breaching party’s conduct, but on the clear and unequivocal election of the innocent party to accept the repudiation.
The key takeaways of this case are as summarized:
- Repudiation alone does not terminate a contract. Termination requires a clear and unequivocal acceptance by the “innocent” (non-repudiating) party.
- Termination cannot be unilateral or internal. A belief that an agreement is over has no legal effect unless communicated.
- Granting indulgences carries risk. Courts may infer that a party willing to extend time once may do so again.
- Pressing for performance affirms the contract. Once affirmed, the right to accept the repudiation is lost.
- Silence can be fatal. Where there is still time for the defaulting party to cure, inaction may leave the contract alive and shift breach risk to the innocent party.
For franchisors, franchisees, and commercial actors alike, the lesson is clear: when faced with repudiation, contact counsel, decide, and communicate, quickly and decisively. Silence is not termination.
About the Author
Sara Ray Ramesh is a litigation associate at Sotos LLP. Prior to joining Sotos, Sara gained valuable experience as a summer and articling student at a national full-service law firm in Toronto. Sara has worked on a wide range of litigation matters spanning various practice areas, including general commercial litigation, construction law, and regulatory proceedings. She can be reached at 416.572.7306 or srayramesh@sotos.ca.
[1] 2025 ONSC 1875.
[2] 2021 ONSC 2512.
This article originally appeared in the Canadian Franchise Association's Legal Digest column.