Last week, we discussed how a Court calculates damages for breach of contract, in order to place the wronged party in the same position as if the contract had been performed. Once the plaintiff has proven a breach of the contract by the defendant, the Court will assess damages based on all of the “natural and direct” consequences of the defendant’s action.
A recent Court of Appeal decision has confirmed that these damages may include the loss of chance to negotiate to avoid a negative outcome (including with a third party), or obtain a better deal elsewhere.
The Trillium case involved a conflict of interest by a solicitor, which the plaintiff alleged had caused it to lose the opportunity to negotiate certain benefits with a third party. The Court of Appeal reaffirmed that in order to show liability for such damages, a plaintiff must show:
- that, but for the defendant’s wrongful conduct, the plaintiff had a chance to obtain a benefit or avoid a loss;
- that the chance lost was real and not merely speculative;
- that the outcome depended on someone or something other than the plaintiff; and
- that the chance lost had some practical value.
If the plaintiff establishes the above criteria, the Court will measure “loss of chance” damages by multiplying the probability of the lost benefit (or of avoiding the loss) by the value of that benefit (or extent of the loss).
The Trillium case also explained that the “loss of chance” analysis can be based on the plaintiff’s “overall chances” of obtaining a benefit or avoiding a loss. Although this will often involve a chain of causal events, the Court is not required to assign a separate probability to each step in the chain.
This decision serves to clarify a significant remedy available to claimants in breach of contract cases, and recognizes the commercial reality that opportunity costs can matter as much as direct losses.
Kitchener Waterloo lawyers advising businesses and individuals about commercial contracts
If you are facing a potential breach of contract, an experienced lawyer is an invaluable resource. At Duncan, Linton LLP, we assist clients with contractual disputes relating to business and commercial matters, and at every level of the construction industry. Our lawyers have experience advising businesses and individuals. Contact us online or call 519-886-3340 to make an appointment with one of our experienced lawyers.