Remoteness of damages (reasonable foreseeability)
Remoteness of damages is the rule on which losses from a breach of contract can be recovered. The Supreme Court of Canada in Bank of America Canada v. Mutual Trust quoted the rule in Hadley v. Baxendale: losses arising naturally from the breach, or reasonably supposed to have been in both parties’ contemplation when they made the contract as the probable result of the breach.
A buyer or seller sizing up a claim after closing meets remoteness when asking which losses from a breached warranty or covenant can be claimed at all. See what remedies apply if the seller backs out for one such situation.
How the Court states the rule
In Bank of America the Court quoted Hadley v. Baxendale: damages should be such as may fairly and reasonably be considered either arising naturally, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach. In C.M. Callow Inc. v. Zollinger the Court said a party that breaches the duty of honest performance is liable to compensate its counterparty for any foreseeable losses suffered in reliance on the misleading representations.
What to ask
- What each party knew, and what the agreement records, about the consequences of a breach when it was signed.
- Whether the agreement excludes some losses, as in a consequential damages exclusion.
- Which province’s law governs the agreement.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Supreme Court of CanadaCourt decisionBank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 SCR 601 (Internet Archive capture of 2025-08-07)
- 02Supreme Court of CanadaCourt decisionC.M. Callow Inc. v. Zollinger, 2020 SCC 45, [2020] 3 SCR 908 (Internet Archive capture of 2026-01-21)
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