 Hello, it's Waylon Chow and this is Discharge and Remedies for Breach of Contract, Module 2C, Part C. We will now start examining the different types of remedies for a breach of contract. So what that is, what a remedy is, where an innocent party sues for a breach of contract, a remedy is what a court will provide as redress for that breach of contract. So there are different types of remedies that a court may order. The first one that's on this list in the table of contents here is a discharge by breach of conditions. So we've already examined that when we were talking about the different types of discharge, so we won't repeat that again here. So we'll jump to looking at damages and there are a number of different types of damages. The first and most common type of damages is called expectation damages. Here is a list of the different types of remedies that a court may award for a breach of contract. First is a discharge due to a breach of condition. Second is some kind of damages. Third is specific performance and fourth is injunction. As I mentioned before in the previous slide, we won't repeat again the explanation of a discharge due to a breach of condition. But in this particular part, we will focus on damages or more specifically expectation damages. When a court orders damages, what it's doing is it's ordering the breaching party, the party who breached the contract, to pay some amount of money to the innocent party to compensate for that breach of contract. How those damages are determined will vary depending on the specific type of damages that are being awarded. This is a chart that summarizes a number of different kinds of damages. I won't go through this chart, but I did highlight in red the types of damages that we will examine. Those are expectation damages, nominal damages, liquidated damages, and punitive damages. With expectation damages, we're compensating the innocent party to put that innocent party, or the plaintiff, in the same financial position as if the contract had been properly performed. The mathematical equation is expectation damages equals expected benefits minus the expected cost. So the expected benefits are the benefits that would have been received if the contract had been performed and the expected costs are the costs that the innocent party would have incurred if the contract had been properly performed. To get a better understanding of expectation damages, let's now look at this quick quiz question. Please pause this video for a few moments so that you may have a look at the question and to try to figure out what you think is the answer. The answer here is B, 20,000. So we get to 20,000 by calculating the expected damages being equal to the expected benefit. The expected benefit that Armand expected to receive if the contract had been performed would have been $100,000. He would have received $100,000 from Melanie. So that expected benefit is, we mined this from that expected benefit, the expected costs of Armand. His expected cost is $80,000. The widget cost him $80,000. So it's $100,000 minus $80,000, which gives us the $20,000. We've already pointed out that expectation damages is to put a plaintiff or innocent party in the same financial position as if the contract had been properly performed. And we looked at the equation of expected damages equals expected benefits minus expected costs. So all of that seems to emphasize that we compensate for monetary losses or dollar losses. But how do we deal with intangible losses, especially emotional distress that arises from a breach of contract? The legal problem is that intangible losses have no apparent economic value. So things such as disappointment, anger, frustration, and sadness, we can't put an economic value or it's very difficult to put an economic value to those types of losses. So the courts in Canada have traditionally denied granting or ordering damages for emotional distress. Now there is an exception to that rule. If peace of mind was an expected contractual benefit, then emotional distress is treated in the same manner as other types of losses, especially monetary losses. So in those types of situations a court will order damages for emotional distress. So typically a contract where an expected contractual benefit is peace of mind would be contracts such as an insurance contract for disability insurance or life insurance where a consumer is purchasing or entering into that insurance contract for the purpose of getting peace of mind. There is the Supreme Court of Canada case, Fidler and Sunlife Assurance, where aggravated damages for mental distress that the plaintiff suffered as a result of the insurance company's refusal to pay disability benefits were ordered or were allowed by the court. Now just because an amount is determined to be needed to put an innocent party back in the same financial position that it expected to be in if the contract had been properly performed, that is not enough for a court to grant that amount as damages. A court will also look or apply two legal test or two legal doctrines to limit the amount of expectation damages that a plaintiff would be entitled to. Those doctrines are called the Doctrine of Remoteness and the Doctrine of Mitigation. The case which sets out the principles for the Doctrine of Remoteness is the English Court of Appeal case called Victoria Laundrie and Newton Industry. The facts of this case are that the manufacturer Newton Industries had a contract to deliver a new boiler to Victoria Laundrie. However Newton delivered that boiler 20 weeks late and Victoria Laundrie sued Newton for its losses that had suffered that were caused by that 20-week delay. So Victoria Laundrie claimed a loss of ordinary business income of 16 pounds per week. So these losses arose from their ordinary laundry operations. They also claimed a loss of 262 pounds per week because they lost the opportunity to get a lucrative government contract because they didn't have this boiler. The legal issue in this case is what losses are Victoria Laundrie entitled to be compensated for. The legal principles that the court applied here is that first the defendant is liable for losses caused by a breach of contract that are not too remote. So what does that mean not too remote? A loss is not remote if either the defendant actually knew that the loss might occur on a breach of contract. So we look at the actual knowledge of the defendant or a reasonable person would have expected or foreseen that the loss may result from the breach of contract. So we apply this reasonable person test or reasonable foreseeability test at the time the contract was created. So when the court applied those legal principles, applied the law to the facts. So what conclusions did they come to? They said that the loss of the ordinary laundry business income, that's the 16 pounds per week, was reasonably expectable even if the manufacturer was not told about it. So that 16 pounds per week Victoria Laundrie will be compensated for. The other conclusion was that the loss of the government contract was not reasonably expectable since it was highly unusual. So it wasn't often or wasn't on a regular basis that Victoria Laundrie had an opportunity to get a government contract from that. So it wasn't reasonably expectable that they would have that loss arising from the breach of contract. So the court ordered Newton compensate Victoria Laundrie for the 16 pounds per week losses but not for the 262 pounds per week losses arising from the loss of that government contract. The other legal doctrine that limits expectation damages is the doctrine of mitigation. Under that doctrine, the plaintiff for the innocent party has a duty to take reasonable steps to minimize their losses. If they fail to mitigate their losses, then their damages that they are entitled to will be reduced to the extent the losses were not reasonably avoided. Back to Drew and Justin. So two weeks before the birthday Justin tells Drew that he will not be showing up at our party. Heartbroken, Drew cancels the party. Drew sues Justin claiming the following expectation damages. Loss of deposits for the banquet hall and the caterer, which is $10,000. Loss of gifts from her friends and family attending the party, which is estimated to be about $100,000. Loss of future income. So this incident caused Drew to fall into a depression which caused her to quit school, which led to the loss of her promising career as an accountant. So she estimates the loss of that future income to be about $1 million. So would a court award her these damages? Let's now look at each of those three damages that Drew is claiming and apply the three different legal tests that are applicable. The first, if you look along the left-hand column, the first legal test is, does those damages put Drew in the same financial position as if the contract was performed? The second test is remoteness. Did the defendant know about the potential loss or the defendant being Justin in this case? Was the loss reasonably expected or foreseeable from the breach of contract? And the third is mitigation. Did the plaintiff Drew take reasonable steps to minimize her losses? So let's look first at the loss of the deposits worth $10,000. So by paying her damages of $10,000, then Drew would be put in the same financial position as if the contract was performed. Drew would not have lost the deposits if Justin had performed as required by the contract. The second legal test of remoteness. It is probably reasonably expected or foreseeable that Justin's failure to perform would cause the cancellation of the party and thus the loss of those deposits. So the test of remoteness is probably satisfied. The last legal test of mitigation. Drew could have taken reasonable steps to avoid losing the deposits by trying to find another performer for the party. If she had done that, that could have reduced or eliminated her claim for the loss of the deposits. Let's now look at the loss of the gifts worth an estimated $100,000. So would giving her the $100,000 as damages put her in the same financial position? Probably not. So although she didn't get the gifts because she canceled the party, Drew also didn't have to pay Justin and any other costs associated with the party. Remember expectation damages equals expectation, expected benefits minus expected costs. So even though she would have had the benefit of $100,000 worth of gifts, she would have also incurred other costs that would have more than offset that $100,000 of gifts. The second test of remoteness is not applicable. If you don't pass the first test of the damages putting her in the same financial position as if the contract was performed, we don't have to look at the test for remoteness or the test for mitigation. Let's now look at the claim for the loss of the future career income. So would that put her in the same financial position as if the contract was performed? And the answer would be yes. If Justin had performed, Drew would not have become depressed and she would not have lost her account and career and then she would not have lost that estimated income of $1 million. How about remoteness? That claim is probably too remote. It's probably not reasonably foreseeable that Justin's no show at the party would cause Drew to lose her potential account and career. So because it's not reasonably foreseeable, this denies her full claim for the loss of income as being too remote. So we don't even need to look at the doctrine of mitigation. But for the sake of interest, let's have a look at anyways. Let's apply mitigation to that claim. So even if it was reasonably foreseeable, Drew must take reasonable steps to treat her depression and to try to have a productive career. This could reduce or eliminate her claim for the loss of future income. So she can't just do nothing about her loss of career or about her depression. She still has to seek treatment and try to have some sort of productive career if she's either as an account or as anything else. So her loss would be somewhat less than $1 million.