Can damages be recoverable in respect of loss caused by impecuniosity?

In the contractual context, it appears that damages may be recoverable in respect of loss caused by impecuniosity provided that the loss meets the ordinary test of remoteness laid down in Hadley v. Baxendale. In Canada, the lead decision is General Securities Limited v. Don Ingram Limited, 1940 CanLII 28 (SCC), [1940] S.C.R. 670. In that case the defendant’s knowledge of the likely consequences of a breach was stressed. Case law emanating from other provinces supports the view that there is no rule that damage caused by impecuniosity is irrecoverable. The real question is whether the loss resulting from the failure to mitigate because of impecuniosity is too remote: see Waddams at 607 and cases cited therein.

As a general rule or principle, I accept that impecuniosity may be a valid defence to a plea of failure to mitigate. However, I have difficulty in accepting that the impecuniosity defence should be available in sale of goods cases involving acceptance of an anticipatory repudiation. My reasoning is not complicated. The law states that if the there is an anticipatory breach by the seller, the buyer has the option of sitting back and waiting until arrival of the promised delivery date and then suing for damages based on the difference between the contract price and the market price as of that date. Obviously, this option does not call for mitigation on the buyer’s part. Indeed, if the buyer lacks sufficient funds to go out and purchase replacement goods in a rising market, the buyer should refuse to accept the anticipatory breach. However, if the buyer elects to accept the repudiation the law says that he must mitigate his loss. Now if we accept that the failure to mitigate can be neutralized by a plea of impecuniosity, we are back to where we started. The buyer is able to accept the repudiation and sue for damages, calculated on the same basis as if the buyer had elected not to accept the anticipatory breach. If the buyer wants that result, the buyer should reject the anticipatory breach, insist on contractual performance and wait until the date of promised delivery before commencing an action for damages for breach of contract. In short, it makes no sense to accept the rule in Roper v. Johnson and then turn around and recognize the impecuniosity defence for purposes of negating the rule. Our buyer had the option of whether to accept the repudiation or not. If he truly lacked the funds necessary to mitigate in a rising market, he should have rejected the anticipatory breach and abstained from initiating a lawsuit for damages for breach of contract until the anticipated date of delivery had arrived.