December 9, 2025
We have written about the measure of damages in a breach of contract case, in particular where a real estate deal fails to close.
It is clear that the normal measure of damages for a failed real estate purchase is the difference between the contract price and the market value of the land on the “assessment date”.
THE ISSUE
But what is the “assessment date”?
THE CASE
The proper approach is nicely illustrated in the 2023 Ontario Court of Appeal decision in The Rosseau Group Inc. v. 2528061 Ontario Inc., in which the court explains that:
The assessment date is usually the date on which the purchase was scheduled to close. Although the court may set a later date if the party seeking damages satisfies certain criteria, the presumption is that damages are to be assessed as of the date of the breach. That presumption is not easily displaced; any deviation from it must be based on legal principle.
Why is this important?
Because where the deal was for the development of the land, the buyer intends to make a profit by servicing, subdividing and selling. Both parties know this, and the so-called “second test” for damages for breach of contract is what was in the “reasonable contemplation” of the parties at the time the contract was entered into.
By selecting the date of closing, the court choses ease of calculation over the application of the normal contract rule. That seems to be the sort of “deviation from legal principle” that the court warns against, but they do it, so it is the law. What they say is:
This court has stated that an early, and predictable, date on which the innocent party’s damages are crystallized promotes efficient behaviour and reduces uncertainty and speculation might not make a lot of sense to you if you are a developer. Isn’t speculation at the heart of the deal? But that is the law. In spite of the fact that the court recognizes that:
The APS was conditional on Rosseau Group satisfying itself as to the economic feasibility of development. The loss, measured in money, of the ability to acquire development lands and the opportunity that provided would, on an objective basis, flow fairly, reasonably, and naturally from the breach of the APS
The court goes on to suggest that the purchase price reflects the development potential of the lands on the date of closing. An approach that reflects lost potential profits is “too speculative and uncertain”.
The good news is that in some cases, there may be an exception which allows recovery of lost profit where there is a specific development contemplated in the APS. The onus is on the developer to show that this loss should be payable.
That did not happen in Rousseau Group. Because the land increased in value between the date the contract was signed, and the closing date, the buyer was entitled to the amount of the increase as damages. Much less than the lost potential profit, but more than the nominal damages payable if the value had not increased.
In a breach of contract case, nominal damages is not a win. Even if the buyer is awarded partial indemnity costs of the lawsuit against the seller, it makes it hardly worth suing.
TAKEAWAYS
- The date of assessment is important
- The date of assessment determines the measure of damages
- Under the “ordinary test” lost profit may not be recoverable
- This makes it hardly worth suing
- Your lawyer may, in limited cases, be able to argue for an award of lost profits. But which category do you fall in?
- Understanding that before you venture on with a lawsuit is an important business concern
WHAT WEILERS LLP CAN DO TO HELP YOU
The real estate litigation team at Weilers LLP is well schooled in assessing damages, and arguing to bring clients the most recovery available. We also give you a reliable opinion upfront regarding the potential recovery, and whether or not it is worth suing.
Our counsel, Brian Babcock, is a lecturer on the law of remedies at the Bora Laskin Faculty of Law and has an ongoing interest in the assessment of damages. He provides this expertise as a member of our litigation team, consulting with all the lawyers in the group.
If you think are unfortunate to have a real estate deal that does not close, give us a call. We may be the right lawyers for you.