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ARTICLE · 15 OCTOBER 2019

Supreme Court May Consider Enforceability Of Liquidated Damages

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On July 11, 2019, the Supreme Court of Canada (the SCC) granted leave to appeal from the Alberta Court of Appeal's decision in Capital Steel Inc v Chandos Construction Ltd, 2019 ABCA 32

CanadaLitigation, Mediation & Arbitration
Brian P. Reid
Brian P. Reid
Keshava Gita
Keshava Gita
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On July 11, 2019, the Supreme Court of Canada (the SCC) granted leave to appeal from the Alberta Court of Appeal's decision in Capital Steel Inc v Chandos Construction Ltd, 2019 ABCA 32 [Chandos]. In a previous blog post, we considered the Alberta Court of Appeal's decision with respect to the enforceability of contract liquidated damages (LDs) upon the insolvency of one of the contracting parties. In this blog, we address the potential implications of Chandos with respect to the common law principle that an LDs clause may be unenforceable if it is found to be a penalty and not a genuine pre-estimate of damages. 

General Law on Liquidated Damages Clauses 

LDs are commonly used in construction and other contracts to pre-determine damages for specific breaches of contract. For example, a general contractor may be required to pay LDs for each day beyond the required completion date taken to complete the work. In theory, by setting LDs in the contract, the innocent

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