Contracts are legally binding documents that detail an agreement between two parties. While having a sound contract is critical for business, it doesn’t eliminate the possibility of a breach by the other party. A breach occurs if the other party doesn’t meet their end of the bargain or perform defectively.
A breach in contract is always a legal matter that the court should handle. When this occurs, seeking legal representation is beneficial. The court awards a remedy depending on the contract terms, nature of breach, and circumstance surrounding the case. Below are common types of remedies for breached contracts.
Compensatory damage is the most common legal remedy for breached contracts. Calculations for this form of damage are based on business losses sustained due to the breach of contract. Compensatory damage can either be:
Expectation damage – Also known as general damages, are losses that directly result from unmet expectations.
Consequential damage – These are losses suffered due to the breach of contract. Most consequential damages are related to loss of profits or income.
Most breaching parties look for ways to avoid compensating consequential losses, mostly fronting claims that these losses are unforeseeable. In some situations, the contract may limit parties from claiming consequential losses. You should read the fine print before signing a contract.
The court can also provide rescission orders, which allow the non-breaching party to end the contract immediately as a remedy for breach. Instead of seeking compensation, the loyal party can also refuse to play its part in the contract. Rescission typically cancels the contract. However, such contracts should be material.
For instance, suppose you were to provide photography services in an event, and the contract states that the client should pay a certain percentage before a specific date. If they fail to pay, you are justified to rescind the contract. Since making payments was at the heart of the contract, you can rescind the contract and refuse to provide services.
This remedy for contract breach requires the breaching party to fulfill their end of the bargain. While monetary compensations are preferred over specific performance, the latter is the best option if monetary damages can’t provide satisfactory compensation. For instance, you may be in a contract involving something unique or can’t be replaced.
The court can also award nominal damage as a remedy for breach of contract. Nominal damages are awarded if the plaintiff cannot provide sufficient evidence to support a breach of contract claims. Like other remedies, the court recognizes that the party breached the contract, but their action didn’t result in direct harm or loss.
Even though nominal damages may seem like a worthless victory, you will get a favorable ruling compared to the breaching party. You can also use this ruling to advance your legal case. Besides, if you had hired an attorney, the defendant may be asked to cover accruing legal fees.
The court can also award liquidated damages or give an injunction to breached contracts. These remedies may be favorable or harsh to the at-fault party. You should do everything possible to avoid being on the receiving end, either as an employer or business partner. For instance, besides honoring your end of the bargain, you should install a contract repository system to ensure that you monitor all your ongoing contracts.