Time and time again we are approached by clients who have entered into a contract, had their contract breached in one way or another, and want to sue the other party. There are many reasons that compel people to sue. Money is most often a motivating factor, but other factors often complement or eclipse monetary considerations alone.
It is important to keep in mind that when it comes to the law of contract, our system is not designed to punish people for wrongdoing, but instead, at a fundamental level it is designed to compensate those who have been wronged. Therefore, the first thing that someone should think about when considering suing is: what are the damages?
The general principle that underlies awarding damages for breach of contract is to, so far as can be done by money, place the wronged party in the position they would have been in if the contract had been performed. Where it is not possible to award damages on this basis, such as where damages cannot be calculated or effectively estimated, damages can be awarded on other bases, such as to put the wronged party in the position they would have been in before the contract was made.
The first principle is by far the most commonly used. For instance, if a party agrees to purchase steel from another party, pays the purchase price, but never receives the steel, under this principle the court would award the wronged party the value of the steel it was promised.
The second principle, which is much less common, would occur where, for instance, one party agrees to provide marketing services to a company in Northern Ontario on a commission based contract. The contractor books flights and arranges accommodations to travel to the company’s location, as agreed. At the last minute the company cancels the contract, and the contractor is on the hook for the expenses they have incurred. In this case the court could use the second principle to compensate the contractor for its expenses, as it would not be possible to determine how much he or she would have earned had the contract been performed.
Other types of damages also available, but they are extremely uncommon and tend to be awarded on top of, and not in substitution for the more common types listed above. Other remedies are also available, such injunctions or forcing the performance of a contract (known as “specific performance”) but again, these are very rarely awarded and the circumstances in which they can be validly requested are specific, prescribed and uncommon.
The reason it is important to consider damages before suing, is because not all claims fit neatly within one or the principles listed above. As mentioned, there are many reasons for suing, but if your claim doesn’t fit within legal framework that would allow you to recover your losses, you may be throwing good money on top of bad, and entering into a long and time-consuming litigation process, with little hope of recovery.
If you are considering bringing a legal claim, the very first thing you should consider is not the defendant’s wrongdoing, or attempting to do justice to the defendant, but how you will recover what you have already lost, and what you may stand to lose by bringing the claim.
This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Dustin today. 416-621-1457 ext.312, dpaterson@hazlolaw.com