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Chapter 12

LAW 122 Chapter Notes - Chapter 12: Expectation Damages, Damages, Specific Performance

Law and Business
Course Code
LAW 122
Theresa Miedema

of 4
LAW122 Chapter 12 Contractual Remedies
Damages pg. 275
Damages: is an award of money that is intended to cure a wrongful event, such as a breach of contract
The nature of that remedy needs to be stressed, Except in rare cases, the plaintiff is not entitled to
receive that exact thing that it expected to get under the agreement only entitled to monetary
Example: I agree to sell my car to you, but later break my promise after you have paid the price,
you are probably not entitles to get the car itself but rather the monetary value of the car
Exception Damages
Exception damages: represent the monetary value of the plaintiff expected to receive under the
Expectation are for-looking because they are intended to place the plaintiff in the position that is
expected to be in after the contract was properly performed
Compensatory damages are backward-looking
Backward looking damages allow the plaintiff to recover the value of something, such as a
favourable reputation or a properly functioning machine, that it previously enjoyed but lost as
a result of the defendant’s wrongful act
Forward-looking damages allow the plaintiff to recover the value of something that it never
previously enjoyed but merely expected to receive under its contract with the defendant
Calculation of Expectation Damages
Expectation Damages = Expected Benefits under the Contract Costs under Contract
Issues with Expectation Damages pg. 278
1. Difficulty if Calculation
If the calculation of the plaintiff’s loss is not merely difficult, but entirely speculative, a court will
not award damages
2. Cost of Cure or Loss
May be question as to whether the plaintiff expected to receive a service or the value of the end
product of that service
3. Alternative Problems
As a general rule, expectation allows the plaintiff to fully recover the anticipated benefits of the
Difficult may arise, however if the contract allowed the defendant to perform in a variety of ways
4. Intangible Losses
Intangible loss is a loss that does not have any apparent economic value
Examples: anger, frustration, sadness, or disappointment that may occur when a promise is
Those losses are real, but do not carry a price in the marketplace
Expectation damages have been awarded for the disappointment by a ruined holiday and for the
grief that was experienced when a beloved pet was suffocated to death
5. Remoteness
The plaintiff cannot recover expectation damages for every loss that it suffers after the
defendant’s breach
The lost must have been caused by the breach
The loss must not the remote from the breach
A loss is remote if it would be unfair hold the defendant legally responsible for it
A loss is not remote if the defendant either should have known or actually did know that it was
the sort of loss that might occur if the contract was breached. The test has two parts:
Liability may be imposed if a reasonable person should have known that the plaintiff’s loss
might result from a breach
Liability may be imposed if the defendant actually know that the plaintiff’s loss might
result from the breach
LAW122 Chapter 12 Contractual Remedies
Remoteness is a principle of fairness
Applied when the parties created their contract, not to the time when the defendant committed
the breach, nor to the time when the judge hears the case
6. Mitigation of Damages
Mitigation occurs when the plaintiff takes steps to minimize the losses flowing from the
defendant’s breach
There is not really a duty in the sense of something that must be done the plaintiff is not
required to mitigate
The plaintiff is responsible only for taking reasonable steps to mitigation a loss Expectation
damages will not be denied if the only way to mitigation a loss was unreasonably difficult,
inconvenient or risky.
Damages are denied only to the extent that the plaintiff unreasonably failed to mitigate
The plaintiff can recover the costs associated with mitigation
Reliance Damages pg. 283
Reliance damages represent the monetary value of the expenses and opportunities that the
plaintiff wasted under the contract
Opposite of expectation damages
Comparing reliance and expectation:
Expectation: “ Give me what I expected to get. Put me in a position that I would have
enjoyed if the contract had been properly performed” forward looking
Reliance: “Give me what I lost. Put me in a position that I would have enjoyed if I had
not wasted resources under this contract.” backward looking
Reliance damages are representing the cost that it incurred, If the plaintiff wants the benefit, it
must be willing to pay the cost.
Only reward to the extent that a contract is not unprofitable the plaintiff cannot use reliance
damages to avoid a loss that it would have suffered if the contract had been performed
Account of Profits
The usual remedy for breach of contract is compensation.
Damages are measures by the plaintiffs loss
Breaking a promise, the defendant may have received a substantial benefit for itself,
Nominal Damages
Nominal damages symbolize the fact that the plaintiff suffered a wrong when the defendant broke
a promise
Can be awarded in small amounts
Judges do not like to waste time
Liquidated Damages
Avoid expensive lawsuit may include a liquidated damages clause in their agreement
Liquidated damages represent a genuine attempt to estimate the value of the loss that may occur
as a result of a breach
If the contract is broken, the innocent party is entitled to recover the liquidated amount, even if
that amount turns out to be more than the loss that it actually suffered,
Must be distinguished from penalties
A penalty requires a party to pay an exorbitant amount if it breaches the contract
If a contract contains a penalty clause, the court will ignore it and calculate damages in the usual
Punitive Damages
Punitive damages are intended to punish the defendant and discourage other people from
behaving badly
If the defendant has done something that the court thinks deserves punishment, the plaintiff may
be entitled to recover both compensatory damages and punitive damages
Punitive damages are different in every country
LAW122 Chapter 12 Contractual Remedies
Two conditions Supreme Court of Canada in order for it to award punitive damages
1. The defendant must not only commit breach of contract but also harsh, vindictive,
reprehensible and malicious manner
2. In committing that breach of contract, the defendant must have also committed another
independently actionable wrong, such as a tort or another breach of contract
Hockey example pg. 286 last paragraph
Equitable Relief pg. 287
Specific Performance
Most common type of equitable relief
Specific performance occurs when the court orders the defendant to fulfill a contractual
obligation to do something
The plaintiff becomes entitled to actual performance rather than the monetary value of that
Discretionary the plaintiff does not have a right to receive it because the defendant breached the
Specific performance depends on four factors:
1. Adequacy of damages
Most important
Specific performance will not be ordered if monetary damages will adequately protect the
plaintiff’s expectations
2. Mutuality
Specific performance will not be ordered in favour of someone unless it could also be ordered
against that same person
3. Judicial Supervision
Specific performance must not require ongoing judicial supervision to ensure compliance
4. Personal Service
Must not require the provision of service on a personal nature
Injunctions pg.289
Injunction occurs when the court orders the defendant to not do something that is prohibited by
the contract
The courts are much more willing to award injunctions than specific performance based on the
courts’ desire to restrict freedom of action as little as possible
An injunction requires someone not to do something specific performance requires someone to
do something
Exclusion Clauses pg. 290
An exclusion clause excludes or limits liability for breach of contract
Applies to certain types of breach
Example: the parties may agree that liability will arise if a promise is intentionally broken but not
if it is carelessly broken
Exclusion clauses play an important role in the commercial world allow businesses to limit its
liability risk management
Rules and restrictions:
An exclusion clause is strictly enforced against the party that drafted it
A business that wants to limit its liability must provide reasonable notice of its exclusion
If a business wants to rely upon an exclusion clause, it must prove that the other party
agreed to it
An exclusion clause will not apply to a fundamental breach if the effect of enforcing the
clause would be unfair
Fundamental breach consists of a breach that goes to the very “core” of the
Unjust Enrichment pg.291
If an agreement is broken, the innocent party usually complains about the breach of contract and
asks for damages, specific performance or an injunction however that party may bring an action
in unjust enrichment and ask for restitution