Hickey's Building Supplies Limited was recently
heard at the Newfoundland Court of Appeal.1 It suggests
that Courts are becoming more willing to award damages for mental
distress for breach of a contract.
As a rule, damages are not available for mental distress when a
contract is breached. Mental suffering is typically not
contemplated as part of the business risk of a transaction.
However, the "peace of mind" exception was used in
Hickey's Building Supplies Limited to award a husband
and wife $15,000 in general damages for mental distress and
inconvenience arising from their contractors' conduct. The
contractors also had to pay the costs to repair the home.
The facts of the case are simple. A married couple entered into
a written contract to build a home for their retirement. The wife
used a wheel chair and cane. The purpose of building the home was
to create a comfortable space to accommodate her abilities. The
couple was adamant that they had emphasized the desire to be
obstacle-free to the builder and refused to make the final payment
under the contract when they realized the transition between
flooring was not perfectly even. The contractor registered a lien
on the home for non-payment.
The contractors argued the uneven floor is acceptable because
they complied with the National Building Code (NBC) minimum
standards. They also argued that because there was a whole
agreement clause stating that the entire agreement must be in
writing, there was no agreement outside the written contract.
The Court sided with the homeowners. It held there was clear
potential for conflict between the clients' needs and what the
NBC permitted. The client's mental distress was said to be
reasonably foreseeable. Even though the NBC allows some
transitional height difference in flooring, the contractors should
have considered that perfectly even flooring was needed in the
circumstances. The Court went beyond interpreting the contract to
adding a term: the contract was entered into not just to build a
home, but to secure a psychological benefit.
The contractors had to compensate the homeowners for the mental
distress resulting from the uneven floors. The Court did not allow
the contractors to rely on the clause stating that the written
contract is the entire agreement and that no other agreement exists
regarding the work on the home. The reasons also state that it is
inherent in a home construction contract that the finished flooring
will be hazard-free. Traditionally, contractors consider the
"hazard-free" benchmark to be satisfied by following the
It is not enough just to have some mental distress,
there must be enough mental distress to warrant payment by
the contractor. In this case, the mental distress from the breach
of the construction contract was said to be serious, prolonged and
far from trifling. It is interesting to compare this conclusion to
the Court's comments on other types of contracts. The Court
agreed that mental distress damages generally are not available in
the employment law context. It also discussed insurance contracts,
where compared to employment it is easier to conclude the denial of
insurance benefits will lead to mental distress. In awarding mental
distress damages to the homeowners, the Court is aligning the
purpose of construction contracts with the purpose of purchasing
insurance, as opposed to making it's purpose akin to the
professional choices made in an employment relationship.
The Court calling construction contracts "peace of mind
contracts" signals new concerns in contract law. How far will
foreseeability extend in construction disputes? Will the NBC
address this issue? Will more and more consumer contracts generally
be considered a peace of mind? What new considerations for medical
evidence will arise?
Contract law in this area will continue to evolve. When
contracting with individuals, ensure your business is protected by
asking appropriate questions and including protective clauses. Be
as prepared as possible to defend against alleged mental distress
by connecting with one of McMillan's lawyers.
1Hickey's Building Supplies Limited v
Sheppard, 2014 NLCA 43 (CanLII).
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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