What is the test for determining the measure of damages for breach of contract?

Alberta, Canada


The following excerpt is from Delcor Painting & Flooring Ltd. v. 20/20 Properties Inc., 2009 ABQB 670 (CanLII):

In determining the measure of damages, the rule in Hadley v. Baxendale (1854), 9 Exch. 341 at 354‑55 is often quoted. The rule provides as follows: ... naturally, i.e. 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 of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.

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