Keneric Tractor Sales Ltd. v. Langille, [1987] 2 S.C.R. 440

Eric Langille and Paul Langille Appellants

v.

Keneric Tractor Sales Limited Respondent

indexed as: keneric tractor sales ltd. v. langille

File No.: 19450.

1987: May 13; 1987: October 15.

Present: Dickson C.J. and Beetz, McIntyre, Wilson and La Forest JJ.

on appeal from the court of appeal for nova scotia

Contracts ‑‑ Damages ‑‑ Chattel lease ‑‑ Breach by lessee ‑‑ Proper method of determining damages ‑‑ Whether general principles of assessment of damages for breach of contract applicable or whether lessor's remedies limited to proceeds of resale plus rental payments due at time of seizure.

Leases ‑‑ Chattel lease ‑‑ Breach by lessee ‑‑ Proper method of determining damages ‑‑ Whether general principles of assessment of damages for breach of contract applicable or whether lessor's remedies limited to proceeds of resale plus rental payments due at time of seizure.

Respondent leased farm equipment to appellants on a hire‑purchase basis and then assigned the leases in order to finance the purchase of the equipment from the manufacturer. Respondent guaranteed appellants' performance under the leasing agreements and agreed to act as manufacturer's agent for the recovery of amounts due under them. The appellants defaulted under the leases and respondent seized the equipment. After due notice, respondent sold the seized equipment and commenced this action claiming damages resulting from breach of the leases. The trial judge found appellants to be in breach of their leasing agreements, assessed damages using a formula that gave effect to the general principles of assessment of damages for breach of contract, and found that respondent had taken reasonable steps to mitigate damages. The Court of Appeal upheld that decision but was divided as to the proper method of assessing damages. The principal issue here is how damages are to be calculated for breach of a chattel lease.

Held: The appeal should be dismissed.

The damages flowing from breach of a chattel lease should be calculated in accordance with general contract principles in the same way as damages flowing from breach of a land lease. It made no sense to view the lease as "simply a conveyance and not a contract" and this anomaly could only be corrected by assessing damages on general contract principles. Practicality supported this approach as well since it avoided the potential for multiplicity of actions inherent in the old approach. The need for consistency within the law also militated in favour of this change. There is no essential difference material to the ascertainment of damages on breach between a lease of land and a lease of chattels. They are both contracts.

The assessment of damages in a case of termination based on breach of a term of the contract should not be any different from the assessment of damages in a case of termination based on repudiation. The breach and the repudiation are merely subdivisions within a general category of conduct, i.e., conduct which gives the innocent party the right to treat the contract as terminated. General contract principles should be applied in both instances.

Appellants' default constituted a breach of lease that gave respondent the right to terminate. Respondent accepted the breach and terminated the leases. It was not necessary to determine whether appellants also repudiated the leases for such a finding would make no difference to the assessment of damages. The contract is not rescinded in the true legal sense, i.e., in the sense of being voided ab initio by some vitiating element. The parties are discharged of their prospective obligations under the contract as from the date of termination but the prospective obligations embodied in the contract are relevant to the assessment of damages.

The general rule for the assessment of damages for breach of contract is that the award should put