Date: Fri, 12 Nov 2004 11:45:57 -0500

From: Jason Neyers

Subject: Interesting Breach of Contract Case

Dear Colleagues:

The Ontario Court of Appeal has recently released its decision in Turczinski v. Dupont Heating & Air Conditioning Limited. The issues in the case were:

(1) In what circumstances will damages for breach of a consumer commercial contract be awarded for mental distress to a contracting party who suffered from a mental disorder, on the basis that it was foreseeable by the contractor that the mental condition would be exacerbated by a breach of the contract? and

(2) Does the rule in tort cases that relieves a thin-skull plaintiff with a pre-existing psychological condition from the duty to mitigate also apply in breach of contract cases?

On issue one: the Court held that damages for intangible injuries were not available in commercial contracts unless they meet the Jarvis criteria (which a replacement of a heater didn't) or could be categorized as special damages under Hadley. The court noted that given the difficulty most lay persons have with understanding mental illness it would be challenging for a party to demonstrate that a contractor had accepted these injuries as special damages. As the court argued:

I observe that there are persuasive reasons to confine within narrow limits the circumstances when damages will be awarded for exacerbation of mental illness for breach of a consumer contract. As in this case, it is very difficult for a lay person to assess the mental state of a stranger, particularly to the extent of predicting with any degree of certainty how a breach of contract might affect the person. An extension of the circumstances when such damages are awarded could cause businesspeople to be wary of dealing with persons with mental disabilities for fear of exposure to claims for damages much higher than the value of the contract.

One issue two: the Court held that the thin skull rule for psychological conditions does not apply to a breaches of contract. The court argued:

In tort cases the defendant wrongdoer takes the plaintiff as found, but in a contract case the parties make a bargain with each other and are made aware of and agree to the obligations and risks that they are undertaking. Therefore both the type and extent of the damages for breach of contract are based on what was within the reasonable contemplation of the parties.

Cheers,

--
Jason Neyers
Assistant Professor of Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435

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