Expectation damages (damages for breach)

When a business sale fails after the agreement is signed, the party that was ready to close may want to know what a court could award. In Bank of America Canada v. Mutual Trust Co., the Supreme Court of Canada said contract damages are determined in one of two ways: expectation damages, the usual measure, and restitution damages, which focus on the advantage gained by the defendant and are infrequently employed. See what happens if the buyer walks away before closing.

Limits on recovery

In Southcott Estates Inc. v. Toronto Catholic District School Board, the Court restated that, as a general rule, a plaintiff will not recover losses it could have avoided by taking reasonable steps, and that a plaintiff who does take reasonable steps may recover the costs and expenses of those steps, provided they are reasonable and were truly incurred in mitigation. See duty to mitigate. In Ontario, s. 99 of the Courts of Justice Act lets a court that can order specific performance award damages in addition to, or in substitution for, it.

What to ask

These are common-law decisions and one Ontario statute; check the rules where you are. Ask a lawyer how the value of the lost deal would be proved, what steps to limit the loss a court would expect, and whether the agreement fixes or excludes certain damages.