assignment on remedies for breach of contract

7.3 Breach of Contract and Remedies

Once a contract is legally formed, both parties are generally expected to perform according to the terms of the contract. A breach of contract claim arises when either (or both) parties claim that there was a failure, without legal excuse, to perform on any, or all, parts and promises of the contract.

Several inquiries are triggered when a breach of contract claims is initiated. The first step is to determine whether a contract existed in the first place. If it did, the following questions may be asked: What did the terms of the contract require of the parties? Were the contractual terms modified at any point? Did the breach actually occur? Was the claimed breach material to the contract? Does any legal excuse or defense to enforcement of the contract exist? What damages were caused by the breach?

Material vs. Minor Breach

The parties’ obligations and remedies for a breach of contract depend on whether the breach is considered material or minor.

When something substantially different from what was expected under the terms of the contract is delivered, the breach will be considered material. For example, the breach will be considered material if the contract promises the delivery of Christmas ornaments, but the buyer receives a box of candies. In the case of a material breach, the non-breaching party has the right to all remedies for breach of the entire contract and is no longer expected to perform their obligations. In considering whether a breach is material, courts will determine whether the non-breaching party still received a benefit, and if so, how much was received, adequate compensation for the damages, the extent of the performance (if any) by the breaching party, any hardship to the breaching party, the negligence or intent behind the behavior of the breaching party, and finally, the possibility that the breaching party will perform the remainder of the contract.

There are times, however, that despite the breaching party’s failure to perform some of the contract, the other party still receives a majority of the goods or services specified in the contract. In this case, the breach will be considered minor. For example, the breaching party may be late on delivering goods or services promised under a contract that does not specify a firm delivery date and that doesn’t state that time is of the essence. In this case, a reasonably short delay would likely only be considered a minor breach of the contract. Consequently, the non-breaching party would still be required to perform as pursuant to the contract. However, damages may be available to them if they suffered some harm as a result of the delay.

Typically, the remedies that will be available if a breach of contract is found are money damages, restitution, rescission, reformation, and specific performance.

Money damages include compensation for financial losses caused by the breach.

Restitution restores the injured party to status quo or the position they had prior to the formation of the contract, by returning to the plaintiff any money or property given pursuant to the contract. This type of relief is typically sought when a contract is voided by courts due to a finding that the defendant is incompetent or lacks capacity.

Rescission or reformation may be available to parties who enter into contracts by mistake, fraud, undue influence, or duress. Rescission terminates the duties of both parties under the contract, while reformation allows courts to equitably change the contract’s substance.

Specific performance compels one party to perform the promises stated in the contract as nearly as practicable. Specific performance is only mandated when money damages do not adequately compensate for the breach. Personal service, however, may not be used to compel specific performance, since doing so would constitute forced labor, i.e. slavery, which is in violation of the U.S. Constitution.

Inevitably, when valid contracts are created, the potential for breach exists. An understanding of what happens when a contract’s terms are breached is fundamental to an understanding of contract law.

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Miller Law INSIGHTS

6 Common Remedies for Breach of Contract in Business

If you’re considering bringing a breach of contract claim in Michigan, you are probably curious about the potential remedies the law provides in such claims. In short, the potential remedies for a breach of contract claim can include compensatory damages, specific performance, injunction, rescission, liquidated damages, and nominal damages.

If someone breaches a contract with you or your company, you deserve justice.

Fortunately, there are a number of potential remedies for breach of contract . These can range from enforcing the terms of the contract to monetary compensation.

If you or your business is facing a contract dispute, the knowledgeable commercial litigation attorneys at the Miller Law Firm can help. We can review your contract and help you pursue a remedy for breach of contract that will best compensate you for the breach.

There are several common remedies for breach of contracts. The appropriate remedy depends on the terms of the contract, the nature of the breach , and the case’s specific circumstances.

1. Compensatory Damages in Contract Law

Compensatory damages refer to the financial compensation awarded to the innocent party in a contract breach case. These damages aim to restore the non-breaching party to their original position by covering any losses they have incurred. Unlike punitive damages, compensatory damages are not meant to punish the breaching party, but rather to make the injured party whole again.

An award of compensatory damages is the most common of the legal remedies for breach of contract.

The calculation of compensatory damages is based on the actual losses you have sustained as a result of the breach of contract. They typically fall into two categories: expectation damages and consequential damages.

Expectation damages

Expectation damages—also referred to as general damages—are those that directly result from the breach of contract.

For example, imagine a company that provides bus tours enters into a contract to buy a bus for $100,000. However, the seller backs out of the contract and refuses to sell the bus. The bus company finds another seller with a similar bus, but they won’t take less than $110,000. In that case, the expectation damages would be $10,000—the difference between the contract price and the amount the company had to pay another seller for the same product.

Buyer’s Remedies for Breach of Contract

Apart from seeking compensation, the buyer has the option to request a refund of the money they have already paid. Another remedy available for a breach of contract is a suit for price, which involves the money paid by the buyer for goods that were not delivered by the seller.

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Consequential damages

Consequential damages are those that flow as a natural consequence of the breach.

Consequential damages often comprises profits that a company lost as a result of the breach.

In the case of the bus example, imagine it took an extra week to secure the new bus. As a result, the tour company had to turn away 1,000 customers that would have each paid $50 for a bus tour. In that case, the company could likely recover consequential damages for the $50,000 they lost in ticket sales.

Often the breaching party will attempt to avoid paying consequential damages by claiming that they are too speculative or that they are not foreseeable. Also, sometimes parties to a contract may limit or preclude either party from recovering consequential damages. An experienced attorney can help you combat these arguments and maximize your damages award.

2. Specific Performance as a Contract Remedy

Specific performance is a type of remedy for breach of contract in which a court orders the breaching party to perform their end of the bargain.

Monetary damages are typically favored over specific performance as a remedy for breach of contract. However, specific performance may be available when monetary damages won’t adequately compensate you. For example, they may apply to a contract for something that is unique and can’t be easily replaced.

In the bus example above, monetary damages would be sufficient to compensate the tour company for its loss. But imagine that the new bus had been used previously by a famous singer. The tour company wanted to use the bus for tours of the singer’s home town. In that case, the tour company could argue for specific performance rather than monetary damages because no other bus would be comparable to the one it contracted to buy.

3. Legal Injunctions in Contract Disputes

Injunctions serve a similar purpose as specific performance. The difference is that with specific performance, the court orders a party to do something. With an injunction, the court often orders a party not to do something.

An injunction may be permanent or temporary. Temporary injunctions are often ordered while litigation is pending to prevent potential damage. For example, in a lawsuit that concerns a breach of a noncompete contract, a court might order the defendant to cease the allegedly competitive activity until the lawsuit is resolved. A permanent injunction, as the name suggests, is permanent. A judge may issue a permanent injunction as part of their final ruling in a lawsuit.

4. Rescission for Material Breach of Contract

Rescission allows a nonbreaching party to cancel the contract as a remedy for a breach. Rather than seeking monetary damages, the nonbreaching party can simply refuse to complete their end of the bargain. Rescission puts the parties back in the position they would have been in had they never entered into the contract.

However, to justify rescission, the breach must be material. That means that it has to go to the heart of the contractual agreement.

For example, imagine that you contract to provide catering services for an event. The contract requires the other party to pay half the contract price by a certain date, but they never pay.

Since payment goes to the heart of the contract, you would be justified in rescinding the contract and refusing to provide the catering services.

5. Liquidated Damages in Contract Cases

Liquidated damages are a specific amount the parties agree to in the contract as compensation for a breach.

Contracts often use liquidated damages provisions where it might be difficult to calculate the correct amount of compensatory damages.

Real estate purchase agreements and construction contracts commonly rely on liquidated damages. They might be a specific sum, such as the amount of the earnest money on a purchase contract. Or they could depend on a formula, such as a certain amount of money for each day a deadline is not met. Partnership agreements are also likely to include liquidated damages provisions.

Although courts typically uphold liquidated damages clauses, they may disregard them if the amount of liquidated damages is drastically smaller or greater than the value of the actual harm the plaintiff has suffered.

6. Awarding Nominal Damages in Contract Violations

A court may award nominal damages as a legal remedy for breach of contract when the plaintiff cannot support their claim for compensatory damages. With nominal damages, the court recognizes that a breach of contract occurred, but no harm can be calculated.

While receiving nominal damages may feel like a pyrrhic victory, the plaintiff does get the benefit of the ruling in their favor. This may be simply a moral victory, or it may pave the way for the plaintiff to pursue another type of legal action. If the contract has an attorney fee provision, an award of nominal damages may also enable the plaintiff to seek their attorney fees from the defendant.

Talk to the Top-Rated Contract Law Attorney in Michigan About Your Case

To learn more about potential remedies for breach of contract in your case, reach out to our Breach of Contract Lawyer in Michigan today. For more than two decades, we have served the business community in Michigan, and we have recovered over $3 billion on behalf of our clients. We can help you determine what types of remedies for breach of contract you might be entitled to collect. Contact us online now or give us a call to discuss your options.

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What are your legal rights when a partner is sabotaging your business, anticipatory repudiation, coronavirus, and breach of contract: facts you should know, what are the elements of a valid breach of contract claim in michigan.

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Home > Legal Guide > Contract Law > Legal Guide to Contract Breaches and Remedies

Legal Guide to Contract Breaches and Remedies

Contract breaches are not always clear-cut; they often exist along a continuum, from minor deviations to significant failures that fundamentally undermine the agreement. In this guide, we will discuss the various types of contract breaches, explore the range of remedies available, and also touch upon the distinct variations under the Uniform Commercial Code (UCC).

Types of Contract Breaches

Material Breach: A material breach, sometimes referred to as a fundamental breach, is a severe violation of the contract that strikes at the heart of the agreement's purpose. This type of breach occurs when one party fails to perform a substantial contractual obligation, undermining the contract's fundamental objective. The severity of a material breach typically allows the non-breaching party to terminate the contract and seek damages.

Immaterial Breach: An immaterial breach (sometimes referred to as a minor breach) is when the breach does not fundamentally undermine the contract's purpose, and the breaching party has substantially performed its part of the agreement. In such cases, the non-breaching party is still obligated to fulfill their duties under the contract but will be entitled to any damages arising from the breach.

Anticipatory Breach: An anticipatory breach, or anticipatory repudiation, happens when one party clearly indicates they will not fulfill their contractual duties before the performance is due. This breach allows the non-breaching party to consider the contract breached immediately, seek remedies, and potentially terminate the contract without waiting for the actual time of performance.

Damages and Remedies for Breach

In breach of contract cases, the type of damages awarded hinges on the nature and extent of the breach, the party at fault, and the resulting consequences.

Expectation Damages: Expectation damages are intended to put the non-breaching party in the position they would have been in if the contract had been fully performed. This means compensating them for any lost benefits or profits directly resulting from the breach.

Reliance Damages: Reliance damages are awarded to reimburse the non-breaching party for expenses or losses incurred while preparing for or performing the contract. Unlike expectation damages, reliance damages are not focused on the benefits that would have been received had the contract been fully performed, but rather on putting the non-breaching party back in the position they were in before the contract was made in the first place. For example, if someone hires a contractor to renovate a house and the contractor backs out after the work has started, the homeowner could claim reliance damages for the expenses already incurred, like the cost of materials or any preparations made based on the contractor's promise.

Restitution: Restitution is primarily concerned with preventing unjust enrichment. It is awarded when one party has conferred a benefit upon another party in the course of performing a contract, and it would be inequitable for the benefitted party to retain that benefit without paying for it. Restitution is often used when a contract is voided or unenforceable, or when a party has partially (but not substantially) performed. That is, a party who substantially performed should be entitled to what they were due under the contract minus the damages caused by the breach. On the other hand, a party who has not substantially performed (i.e. materially breached) may only be able to recover damages representing the value they conferred to the non-breaching party.    

Consequential Damages: Consequential damages refer to secondary losses that arise as a foreseeable result of a breach, not directly from the breach itself. For instance, if a company misses critical deadlines due to a software vendor's failure to deliver, the company can claim consequential damages for lost future revenue, in addition to direct damages like the cost of replacement software.

Liquidated Damages: Liquidated damages are a pre-determined sum stipulated in a contract, payable by a breaching party to compensate the non-breaching party for any anticipated losses arising from the breach.

Specific Performance: Specific performance is an equitable remedy courts use to require that a breaching party fulfill the obligations under the contract (rather than allowing them to simply pay monetary compensation). This remedy is generally used in connection with real estate transactions and where other unique items or services are involved such that monetary damages cannot adequately compensate the non-breaching party.

Injunction: An injunction is a court order directing a party to do or refrain from doing specific acts. This remedy is meant to prevent irreparable harm or to maintain the status quo during the resolution of a legal dispute. For example, if a former employee attempts to use confidential information in violation of a non-disclosure agreement, an injunction can be sought to prevent the misuse of this information.

Rescission: Rescission essentially cancels the contract and releases both parties from their obligations. This is an ideal option for unwinding/voiding contracts that were formed under duress, fraud, or misrepresentation.

Reformation: Reformation involves modifying the contract to reflect what the parties actually intended. This remedy may be applied in cases where the written contract has errors or does not fully express the agreement's terms.

Understanding Breaches and Remedies under the Uniform Commercial Code (UCC)

Now that we have discussed the various types of contract breaches and the legal remedies available under common law, let's examine them under UCC which governs contracts for the sale of goods, encompassing a wide range of transactions, from the sale of tangible products to mixed transactions involving both goods and services.

The Perfect Tender Rule : One fundamental principle of the UCC is the "perfect tender rule." Traditionally, under the perfect tender rule, a seller would be in breach if they did not deliver goods that conformed exactly to the terms of the contract in every aspect—quantity, quality, delivery time, and other specifications. However, in practice, minor deviations might not always constitute a breach, especially if they don't significantly affect the overall value or usability of the goods. For example, slight variations in product specifications that are generally acceptable in the trade or that do not materially alter the value of the goods might not be seen as breaching the contract.

The Right to Cure : The UCC affords sellers the “right to cure” in certain circumstances, meaning that if the initial delivery of goods is non-conforming, the seller may have an opportunity to correct the issue by delivering conforming goods within the contract's time for performance.

Installment Contracts : In cases involving installment contracts, where goods are to be delivered in multiple installments, a breach in one installment does not necessarily constitute a breach of the entire contract. Each installment is treated as a separate contract, and a breach in one installment only gives rise to remedies for that specific breach. For example, if a buyer agrees to purchase 1000 laptops to be delivered in monthly installments of 100, a breach in the first delivery does not automatically void the entire contract; it only pertains to the first installment.

Buyer's Remedies Under the UCC

When it comes to damages, the UCC takes an approach that generally aligns with the principles of expectation remedies as discussed above in the sense that the non-breaching party should be in as good a position as they would have been had the contract been fully performed. 

Thus if a buyer receives goods that do not conform to the contract's requirements in terms of quantity, quality, or other specifications, they can reject the goods and sue for damages, which would be the difference between the contract price and market price.

The buyer also has the “right to cover,” which means that when a seller breaches the contract, the buyer can purchase substitute goods from another source and recover from the seller the difference between the contract price and the price they had to pay for the substitutes.

Alternatively, a buyer can choose to accept non-conforming goods as is, and seek damages for the difference between the value of the conforming goods (had they been delivered exactly to the specifications agreed to in the contract) and the value of the non-conforming goods as accepted by the buyer.

The UCC provides that buyers are entitled to both incidental and consequential damages. Incidental damages cover expenses directly related to the breach, such as costs incurred in obtaining substitute goods. Consequential damages, on the other hand, refer to losses that occur as a secondary effect of the breach, such as lost profits or additional operational costs that arise from not having the goods as promised. These damages are meant to compensate the buyer for the financial impact of the breach, beyond just the immediate cost of the goods themselves, and are recoverable provided they were foreseeable and directly linked to the breach. contract

Seller’s Remedies Under the UCC

Under the UCC, if a buyer fails to fulfill their contractual obligations, such as not paying on time or refusing to accept conforming goods, the seller can cancel the contract and sue for the difference between the contract price and the market value of the goods at the time of the breach.

Alternatively, the seller can resell the goods to a third party and then claim any losses from the original buyer, (such as the difference between the original contract price and the resale price), plus any additional costs incurred due to the buyer's breach.

Note that if the goods are unique or cannot be resold easily, the seller may claim the full contract price from the buyer as damages. This is especially relevant in cases involving custom-made or specially ordered items, such as shirts with team logos or purpose-built furniture ordered to spec.

Finally, the seller has the right to recover incidental damages resulting from the buyer's breach, which may include costs incurred in caring for and preserving the goods after the breach, expenses in connection with the return or resale of the goods, and any other reasonably incurred expenses directly resulting from the buyer's failure to fulfill the contract terms. 

Understanding and effectively handling contract breaches requires not only knowledge but also practical legal expertise. If you find yourself in a situation where you need to address a breach or enforce a contract, Through AAL’s directory, you can find a number of attorneys with extensive experience in practicing contract law who can provide you with tailored advice and effective solutions, ensuring your contractual matters are handled with expertise and care.

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Guide to Remedies for Breach of Contract

(This may not be the same place you live)

  What are the Remedies to a Breach of Contract?

A contract is an agreement between two or more people or entities which creates legal performance obligations as described in the contract. A contract can be oral or written, but some types must be in writing to be enforceable. If one or more parties to a contract do not perform according to the terms of the contract, then there is a breach of the contract . The remedies for breach of contract are:

• A remedy specified in the contract itself, i.e. liquidated damages ;
• An award of money damages ;
• Restitution ;
• Rescission ;
• Reformation ; and
• Specific Performance .

What Are the Ways You Can Breach a Contract?

What should you do if the contract has been breached, how do i sue for a breach of contract, what are the penalties for breach of contract, what are some defenses for breach of contract, do i need a lawyer for a breach of contract.

There are three main ways in which the party to a contract can breach the contract. They include the following:

• Anticipatory breach : This is sometimes referred to as anticipatory repudiation, it occurs when the breaching party tells the non-breaching party that they will not provide the performance promised in the contract. Once the other party is notified, they can claim breach of contract.
• Minor Breach: A minor breach of contract happens when a party fails to perform some minor aspect of the performance called for by contract. In this case, the entire contract has not been violated; it can still be substantially performed. This issue can arise if there is a technical error in the contract (e.g., a wrong date, price, or a typo in the contract);
• Material or fundamental breach: This is the most common type of breach cited as the basis of a breach of contract action. An actionable breach is so substantial that it essentially cancels the contract, because it renders performance by either party impossible.

A contract can also be breached if the contract is fraudulent, if it was formed illegally or is unconscionable, or if there is a mistake of fact in the contract terms. The parties may also include a clause unique to their contract that specifies when a party’s actions can be considered a breach.

Additionally, state law and the type of contract it is (e.g., lease agreement, sales contract, government contract, etc.) may indicate other ways that a contract can be breached.

If a party has knowingly breached a contract , they should take the necessary steps to repair the breach immediately. The party should strive to perform their contractual obligation before the other party resorts to legal action.

The following are some steps that a party in breach of a contract should consider taking:

• The breaching party should locate the section in the contract that discusses what the parties can do in the event of a breach, if there is such a section. For example, a clause in the contract may state that when one party breaches the contract, the agreement is terminated and no further action by the parties is required. Alternatively, the contract may say that a party has a certain time frame in which they can repair the breach before the non-breaching party is permitted to file a lawsuit.
• If the breaching party finds that they cannot completely repair the breach, they should then contact the non-breaching party to show good faith. This can help the breaching party appear more favorable in court if the issue results in a lawsuit. Also, the parties may be able to resolve the breach through alternative methods without resorting to legal action;
• Finally, the breaching party can look for an alternative way to fulfill the requirements of the agreement. This will show the court that the parties attempted to work cooperatively and tried to solve the issue before resorting to legal action.

Of course, generally, the non-breaching party has a right to file a lawsuit for breach of contract against the breaching party unless the contract specifically provides otherwise by, e.g. specifying arbitration as the sole method for resolving disputes. Again, several steps can be taken by the non-breaching party before filing a claim, which include:

• For example, a liquidated damages clause is a clause that specifies the amount of damages that must be paid by the party who breaches the contract; they are common in construction contracts where delays are a frequent problem. The contract may specify the amount of damages that a contractor must pay for each day of delay in completion of the project;
• or a contract might contain a clause that states that the breaching party has a certain amount of time in which to repair the breach;
• If the non-breaching party cannot fully repair the breach but is willing to offer a compromise that fulfills the non-breaching party’s requirements, then it is beneficial for both parties to resolve the dispute without resorting to legal action.
• On the other hand, the non-breaching party is not obligated to agree to a remedy that does not fully resolve the breach or does not sufficiently compensate them for the damages they suffered because of the breach. If this is the case, then the non-breaching party should consider filing a lawsuit to seek compensatory damages for any loss they have suffered.
• File complaint: Finally, once all other options have been exhausted, then the non-breaching party should consider filing a lawsuit in civil court.

Before filing a breach of contract claim, a person must review the contract for any clauses that might affect whether a lawsuit can be brought. For instance, the contract may only allow the parties to use mediation or arbitration processes to resolve a dispute. There also may be time limits or procedures that the parties have to follow before they can file a complaint in court.

Next, a party should review the facts to ensure that all elements of breach of contract are supported by evidence. For example, success with a claim for breach of contract requires proving the following four factors:

• Offer, acceptance and consideration : The parties entered into a valid contract through the process of an offer by one party and acceptance of it by the other with an exchange of consideration or value for the performance of each;
• Performance by the non-breaching party : The non-breaching party must produce evidence to show that they performed their obligation per the contract or were justified in not performing it;
• Breach by one party : The non-breaching party also must show that the other party breached the contract in some specific, identifiable way, and it amounted to a material or substantial breach of the party’s promise to perform;
• Damage : The non-breaching party must demonstrate that they suffered a loss because of the breach and that the value of the loss can be calculated with a reasonable degree of certainty.

If the non-breaching party believes that the elements of breach of contract are supported by the facts, the party should then consider filing a breach of contract claim with the proper court. Where, when, and how the lawsuit should be filed will depend on the rules of civil procedure, relevant state laws, and the rules of the court in which it is being filed. An experienced contract attorney should know how to prepare the necessary documents and when and where to file them.

In general, there are two types of remedies for breach of contract: legal remedies and equitable remedies . Legal remedies refer to monetary damage awards, such as compensatory , special , nominal , and liquidated damages.

In contrast, equitable remedies are awarded by a court when a legal remedy will not sufficiently compensate a party for the damage done by the breach of a contract. This includes remedies, such as specific performance, reformation, restitution or rescission.

The difference between the remedies awarded will dictate what the non-breaching party can expect to receive and what the breaching party will be required to provide as compensation for their breach.

For example, when a person who is selling their house refuses to hand over the keys and property to the buyer at the closing, then the buyer may sue for specific performance. This means that the court can require the seller to deliver their property to the buyer.

The type of legal remedy awarded will also determine how to calculate the amount of damages that the non-breaching party should receive.

Other types of damages that a non-breaching party might pursue include reliance , consequential , and punitive damages . It is important to note that punitive damages are rarely awarded for breach of contract. However, if punitive damages are awarded, then the defendant can expect to pay a much higher award of damages. This is because punitive damages are meant to punish and deter the defendant and others from behaving similarly in the future.

There are a number of defenses that can be raised against a breach of contract claim. Some of the more common ones include:

• Fraud : Fraud occurs when one party intentionally misleads another party about the purpose or conditions of a contract in order to persuade them to enter into and fulfill it.
• Incapacity : If the breaching party lacked the capacity or competency necessary to enter into a contract (e.g., was a minor or mentally incapable), then incapacity can be a defense.
• Illegality : If the contract itself is illegal, then it would be considered a defense. For example, a contract to sell drugs or murder someone would be an illegal contract; and a court will not enforce it.
• Mutual Mistake : If the parties are mistaken about the purpose or terms of their agreement, then this can serve as a defense to a claim for breach of contract.
• Duress: If the other party forced the breaching party to sign the contract against their will, it is a defense that can invalidate the contract.
• Once the defendant raises it as a defense, the burden of proof shifts to the plaintiff to prove that they have not in fact done anything wrong to breach the contract.
• Statute of Frauds: The Statute of Frauds is a law that provides that certain contracts must be in writing to be valid and enforceable by a court. So, if a contract is one that must be in writing, and it is not, then a defendant can avoid enforcement by raising the Statute of Frauds defense;
• While this is not exactly a defense, if the court finds that the contract is unconscionable, then they will usually void (cancel) the contract, which will release the parties from their contract obligations. No damages or remedies will be awarded.

Not all breach of contract disputes require legal assistance or court intervention to resolve the issue. For example, if the breaching party to the contract is a friend or neighbor and the terms of the contract relate to something of little value, then the parties should try to work out any issues between themselves. This saves the parties time, money, and neighborly relations.

On the other hand, if your dispute involves a business contract or the terms of the contract involve something else that is more substantial, then you should contact an experienced contract lawyer for further assistance.

A lawyer can help you draft, review, edit, and negotiate the terms of your contract. This can help minimize the risks involved with entering into a contract and may help to prevent a legal dispute over contract terms in the future.

Finally, you should definitely speak with an experienced contract lawyer if you want to sue or are being sued for breach of contract. A lawyer can help you prepare your case, determine whether any defenses or remedies are available, and will be able to represent you in court. They can also provide assistance and give advice regarding mediation or arbitration procedures.

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Susan is a member of the State Bar of California. She received her J.D. degree in 1983 from the University of California, Hastings College of Law and practiced plaintiff’s personal injury law for 8 years in California. She also taught civil procedure in the Paralegal program at Santa Clara University. She then taught English as a foreign language for eight years in the Czech Republic. Most recently, she taught English as a second language for Montgomery County Public Schools in suburban Washington, D.C. Now she devotes her time to writing on legal and environmental topics. You can follow her on her LinkedIn page. Read More

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A breach of contract occurs whenever a party who entered a contract fails to perform their promised obligations. Due to the frequency of breaches of contract, a robust body of law has grown to resolve the ensuing disputes. 

The overarching goal of contract law is to place the harmed party in the same economic position they would have been in had no breach of contract occurred. As a result, the default remedy available for a breach of contract is monetary damages . 

Generally, these damages are limited to what is listed in the contract and, unlike damages from tort cases, courts do not award punitive damages for breaches of contract. For example, if a party agrees to pay $50,000 to have their house painted but is only willing to hand over $10,000 once the painting is complete, the court will award the painters $40,000 in damages. This hesitancy to award punitive damages is due to the theory of efficient breach which argues that breaching contracts and paying damages is sometimes economically beneficial for society as a whole. 

Nonetheless, in specific circumstances, a party may successfully recover more money than initially contracted for under the doctrine of reliance damages . Under this doctrine , a party who reasonably relied upon a contract that was later breached can be granted compensation for the reasonable expenses they incurred due to that reliance. For example, a party who purchases lifeguard equipment in reliance upon a pool construction contract’s fulfillment may be able to recover the costs of the lifeguard equipment in the event of a breach. Reliance damages are based upon the principle of promissory estoppel , and granting them is subject to the court’s discretion. 

That said, parties harmed by a breach of contract have a duty to mitigate that harm. For example, before they could recover, the aforementioned lifeguard equipment buyer must first attempt to resell the equipment to a new buyer. Failure to satisfy the duty to mitigate will result in an inability to recover damages. 

In scenarios where damages are insufficient, a court may instead award specific performance . Under the specific performance remedy, the breaching party must attempt to fulfill the terms of the contract as best as possible. Specific performance, however, is generally only awarded when dealing with one-of-a-kind assets like real estate . 

Parties wishing to contract around the above remedies can do so through the use of liquidated damages provisions. These provisions establish in advance how much money a breaching party must pay and sidestep the expensive and time-consuming process of determining the actual damage caused by the breach. While liquidated damages clauses are generally allowed, a court may strike one down if the clause appears to be proxying for punitive damages or if the terms of the clause are unconscionable . 

[Last updated in June of 2022 by the Wex Definitions Team ] 

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Breach of Contract: Causes, Consequences, and Remedies

In this blog, we will unravel the diverse causes behind contract breaches, ranging from non-performance and delayed delivery to outright refusal to fulfill contractual obligations. Additionally, we will examine the far-reaching consequences such breaches may entail for both parties involved, including financial losses, damaged relationships, and potential legal ramifications. Furthermore, a comprehensive overview of the available remedies, such as monetary damages, specific performance, and contract termination, will be provided, shedding light on the avenues available to address and rectify breaches of contract.

What is a Breach of Contract?  

A breach of contract occurs when one party fails to fulfill its obligations as outlined in a legally binding agreement, leading to a violation of the terms and conditions specified in the contract. This failure to perform can manifest in various ways, such as a party not delivering goods or services as promised, not meeting agreed-upon deadlines, or deviating from the stipulated terms. A breach can be categorized as either material, where the violation is significant enough to undermine the core purpose of the contract, or immaterial, where the breach is minor and doesn’t substantially affect the overall agreement. When a breach occurs, the non-breaching party may be entitled to remedies such as damages, specific performance, or termination of the contract, depending on the nature and severity of the violation, as well as the terms outlined in the agreement and applicable legal principles. Legal action may be pursued to enforce the contract and seek compensation for losses incurred due to the breach.

Common Causes of Breach of Contract

Breach of contract is a significant issue in business law, often arising from various factors that can lead to disputes between parties involved in contractual agreements. Understanding the common causes of breach of contract is essential for businesses to mitigate risks and ensure smoother transactions.

One common cause is a failure to perform contractual obligations. This occurs when one party does not fulfill the terms and conditions outlined in the agreement. This may include delays in delivery, substandard work, or non-compliance with specified requirements. Such breaches can result in financial losses, damage to reputation, and strained business relationships.

Misrepresentation is another frequent cause of contract breaches. When one party provides false or misleading information during negotiations or in the contract itself, it can lead to misunderstandings and disputes. This may involve false statements about the quality of goods or services, financial stability, or other critical aspects of the agreement.

A third cause is an anticipatory breach, where one party indicates, through words or actions, that they do not intend to fulfill their contractual obligations. This could be evident through a clear refusal to perform, an inability to meet deadlines or a declaration of intent to breach the contract. Anticipatory breaches often allow the other party to pursue legal remedies without waiting for the actual breach to occur.

Lastly, external factors such as unforeseen events or “force majeure” events can lead to breaches. These events, including natural disasters, political instability, or economic crises, may make it impossible for a party to fulfill their contractual obligations. Many contracts include force majeure clauses to address such situations, but disputes can still arise over the application of these clauses.

Consequences of Breaching a Contract 

The consequences of a breach of contract in business law can have far-reaching implications for the parties involved. These repercussions often extend beyond mere financial losses and can impact relationships, reputation, and legal standing.

One significant consequence is the potential for financial damages. When a party breaches a contract, the non-breaching party is entitled to seek compensation for the losses suffered as a result of the breach. These damages can include direct financial losses, consequential damages arising from the breach, and sometimes even punitive damages if the breach is deemed willful or malicious.

Moreover, a breach of contract can strain business relationships and tarnish reputations. Trust is a vital component of any business transaction, and when one party fails to fulfill its obligations, it erodes the trust between the parties involved. This can lead to a breakdown in the business relationship, making it difficult for the parties to collaborate in the future. Negative word-of-mouth and damage to professional reputations can further exacerbate the consequences of a breach.

Legal consequences are also a significant consideration. The non-breaching party may choose to pursue legal remedies, such as filing a lawsuit to enforce the contract or seeking specific performance, where the court orders the breaching party to fulfill their contractual obligations. In some cases, alternative dispute resolution methods like mediation or arbitration may be employed to resolve the dispute without going through the lengthy court process.

Lastly, a breach of contract can trigger contractual remedies outlined in the agreement itself. Many contracts include clauses specifying the consequences of a breach, such as termination of the contract, forfeiture of deposits or advance payments, or the imposition of penalties. These contractual remedies provide a framework for addressing breaches and can influence how the parties handle disputes.

Legal Remedies For Breach of Contract  

Legal remedies for breach of contract in business law provide a framework for parties to seek redress when one party fails to fulfill its contractual obligations. These remedies are designed to compensate the non-breaching party for the losses suffered and, in some cases, to compel the breaching party to fulfill their contractual duties. Here are several common legal remedies available in the context of breach of contract:

• Damages : Damages are the most common remedy for breach of contract. The non-breaching party may seek monetary compensation to cover the financial losses incurred due to the breach. There are various types of damages, including direct damages that result directly from the breach and consequential damages that arise as a consequence of the breach.
• Specific Performance : In certain situations, a court may order specific performance, requiring the breaching party to fulfill their contractual obligations as outlined in the agreement. This remedy is typically sought when monetary compensation is deemed inadequate, such as in cases involving unique goods or services.
• Rescission : Rescission involves canceling the contract and restoring the parties to their pre-contractual positions. This remedy is often pursued when the breach is so fundamental that continuing with the contract is no longer feasible or beneficial.
• Injunctions : Courts may issue injunctions to prevent the breaching party from taking certain actions or to compel them to perform specific duties. Injunctions are particularly relevant in cases where ongoing harm is likely to occur if immediate action is not taken.

It’s important to note that the availability of these remedies may vary based on the specific circumstances, the nature of the breach, and the terms of the contract. Additionally, parties may choose alternative dispute resolution methods, such as arbitration or mediation, as specified in the contract, to resolve their disputes without resorting to litigation.

Understanding the legal remedies available is crucial for businesses when entering into contractual agreements, as it allows them to assess the potential courses of action in the event of a breach and helps mitigate risks associated with contractual relationships.

Seek Guidance From a Georgia Breach of Contract Attorney

Navigating the complexities of breach of contract in business law requires a comprehensive understanding of the causes, consequences, and available remedies. Businesses must prioritize the drafting of clear and detailed contracts, conduct due diligence during negotiations, and be proactive in addressing potential issues to minimize the risk of disputes. While breaches can lead to financial losses, strained relationships, and legal consequences, being aware of the legal remedies, such as damages, specific performance, rescission, and injunctions, empowers parties to seek redress and enforce their contractual rights.

If you find yourself grappling with a breach of contract or seeking guidance on how to fortify your contractual relationships, Sparks Law is here to help. Our experienced business law attorneys can provide tailored advice to address your specific needs. Contact us today to ensure that your business transactions are built on a solid legal foundation, protecting your interests and fostering successful collaborations.

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Remedies for breach of contract

Practical law uk articles 7-101-0603  (approx. 11 pages), remoteness of loss.

• All loss which flows naturally from the breach.
• All loss which was in the contemplation of the parties at thetime the contract was made as a probable results of thebreach.

Measure of damages

Advance payments, penalty clauses and liquidated damages, penalty or liquidated damages.

• A clause will be construed as a penalty clause if the sumspecified is "extravagant and unconscionable" in comparison withthe greatest loss that could possibly have been proved as aresult of the breach.
• It is likely to be a penalty if the breach of contractconsists of not paying a sum of money and the sum stipulated asdamages is greater than the sum which ought to have beenpaid.
• There is a presumption that if the same sum is stated toapply to different types of breach of contract, some of which areserious and others not, it is likely to be a penalty clause.
• It is not a bar to the operation of a liquidated damagesclause that a precise pre-estimation is impossible.

Specific performance

• Delay in asking for the order ( Lazard Brothers & CoLtd v Fairfield Properties co (Mayfair) Ltd [1977] 121 SJ793 ).
• Whether the person seeking performance is prepared to performhis side of the contract ( Chappell v Times Newspapers Ltd[1975] 1 WLR 482 ).
• Whether the person against whom the order is sought wouldsuffer hardship in performing ( Patel v Ali [1984] 1 All ER978 ).
• The difference between the benefit the order would give toone party and the cost of performance to the other ( Tito vWaddell (No 2) [1977] Ch 106 ).
• Whether any third party rights would be affected.
• Whether the contract lacks adequate consideration (the rule"equity will not assist a volunteer" applies so that specificperformance will not be ordered if the contract is for nominalconsideration even if it is under seal ( Jeffrys v Jeffrys[1841] 1 Cr & Ph 138 )).

Quasi contract: other remedies

Limitation of actions.

• For simple contracts, six years from when the cause of actionaccrued.
• For deeds, twelve years from when the cause of actionaccrued.

Self-help remedies

Retention of title.

• A right for the supplier to enter the buyer's premises inorder to repossess the goods (so that the supplier will notcommit a trespass when doing so).
• An obligation on the part of the buyer to store thesupplier's goods separately from goods belonging to thirdparties, to mark them as the supplier's property and to allow thesupplier access to the buyer's premises to verify that this hasbeen done. This will enable the supplier to identify its owngoods if a repossession of the goods becomes necessary.
• A list of insolvency related events which will trigger thesupplier's right to demand payment for the goods (if not alreadydue) and to repossess them.

All monies clause

Proceeds of sale clause, mixed goods clause.

• Goods which maintain their identity (and which, if attachedto other goods, can be separated without causing damage). Suchgoods will continue to belong to the supplier where there is abasic form of retention of title clause as described above, so noadditional provisions are necessary.
• Goods which lose their identity in the manufacturing process;for example, the sale of resin which is used in the manufactureof chipboard. The resulting new product (the chipboard) willbelong to the buyer and the courts have held that if a retentionof title clause purports to reserve rights in the new goods tothe supplier, the clause will create a charge which will beineffective if not registered ( Borden (UK) Limited v ScottishTimber Products [1979] 3 AER 961 ).

Limitations on effectiveness

• If the buyer is a company against which an application for anadministration order has been made, no steps may be taken withoutthe consent of the court (which in practice is unlikely to beforthcoming) to repossess goods supplied pursuant to a retentionof title clause until the hearing of the application and, if anadministration order is made, while the order remains in force( section 11, Insolvency Act 1986 ).
• The retention of title clause must be properly incorporatedin the contract between the supplier and the buyer in order to beenforceable as a contract term. A retention of title clause isnot, however, so unusual that special notice needs to be given ofit (John Snow & Company Limited v DBG Woodcroft &Company Limited [1985] BCLC 54) .
• Retention of title will be of little or no practical benefitwhere the goods supplied are perishable or have a low scrapvalue.
• Retention of title is an area which generates a rapidlychanging body of case law. Particular clauses are liable to berendered ineffective by a court decision at any time, so a reviewof retention of title clauses is a particularly important aspectof the overall review of standard terms which suppliers should becarrying out on a regular basis.
• The right to enter the buyer's premises withouttrespassing.
• The ability to recover goods stored at the buyer's premiseswhich can be identified as the supplier's, possibly to the extentof all sums owed by the buyer to the supplier.
• A possible action for damages for conversion against areceiver or liquidator personally who sells goods which wereidentifiably the supplier's.
• Reducing the period of credit allowed to the buyer, or theamount of credit, or both.
• Taking alternative forms of security, such as a bankguarantee or letter of credit.
• Obtaining credit insurance. This has become more readilyavailable in recent years, with a greater choice of tailor-madeproducts on offer. The existence of a satisfactory set ofstandard terms of business is likely to be a precondition toobtaining such insurance.

Risk and insurance

Taking security, withholding payment and set-off.

• Legal set-off. Legal set-off is a proceduralremedy which evolved from the Statutes of set-off and a number of18th and 19th century cases ( see also Bennett v White [1910]2QB 643 CA ). It can only be resorted to as a defence to acourt action and, unlike other types of set-off, is not availableas a "self-help" remedy. Legal set-off is also only availablewhere the two claims are liquidated or ascertainable withcertainty and are both due and payable at the commencement of theaction. However, unlike equitable set-off, the two claims do nothave to arise from the same transaction or closely connectedtransactions.
• Equitable set-off. This is available to adebtor outside the context of litigation where his cross-claimarises from the same transaction (or a closely relatedtransaction) as the debt owed. Either and probably both of theclaims may be for an unliquidated sum, such as a claim fordamages ( Hanak v Green [1958] 2 All ER 141 CA and McCreagh vJudd [1923] WN 174 DC ). As it is a self-help remedy, adebtor can, without formality, simply deduct the amount of hismutual cross-claim from the debt he owes and tender the balanceof the debt (if any) to the creditor. However, as with legalset-off, the sums in question must be due and payable or, in thecase of unliquidated damages must be a reasonable assessment ofthe loss made in good faith ( The Nanfri [1978] Lloyd's Rep132 CA ).
• Banker's set-off. Banker's set-off arises ina situation where a customer has more than one account with hisbank, at least one of which is in debit and one of which is incredit. It is also known as the right to combine accounts.Banker's set-off is arguably of wider commercial application andcould be available in any situation where one party has two ormore accounts with another, for example between principals andtheir agents or between a supplier and his customer, but theposition has not been explicitly judicially determined. A debtorcan only invoke banker's set-off if the two accounts are currentor running accounts, that is, where the balance on the account,whether it be positive or negative, is payable on demand or onreasonably short notice ( Re Willis, Percival & Co exparte Morier [1879] 12 ChD 491 CA ). As with equitableset-off, the remedy is one of self-help and can be automaticallyexercised without formality.
• Insolvency set-off. While each of the abovecategories of set-off may be varied by contract, either byextending or restricting a party's rights under the general law,the rules of insolvency set-off are mandatory and may not bevaried by contract ( Halesown Presswork and Assemblies Ltd vWestminster Bank [1972] AC 785 ). Contractual rights ofset-off do not survive the liquidation or bankruptcy of eitherthe creditor or the debtor.
• Prior to the company or individual going into liquidation orbankruptcy.
• At any time when the creditor had notice of either aresolution or a petition to wind up the company or bankrupt theindividual.

Purpose of exclusion of set-off clause

Sga and rights against goods.

• Reject the goods and sue for any loss occasioned by thebreach, and if the price had been paid, recover the price;or
• Retain the goods, pay for them at the contract rate, recoversuch part of the price for the undelivered quantity and claimdamages for the breach.
• Retain the goods. This can be done if the seller is still inpossession of the goods and the buyer has not been given a periodof credit, or the credit period has expired or the buyer isinsolvent. The seller can retain the goods until the buyer paysfor them (the seller's lien). The seller loses his lien when thegoods are delivered to an independent carrier or the buyerlawfully takes possession of them.
• Stop the goods in transit. If the buyer is insolvent theunpaid seller may stop the goods in transit and retain them untilthe buyer pays for them ( section 44 ). Sections 45 and 46provide rules as the duration of transit and how to effectstoppage.
• Resell the goods. Section 48(3) allows the seller to resellthe perishable goods if he notifies the buyer of his intention tosell and the buyer does not pay within a reasonable time. Theseller may claim damages from the buyer for loss on the resale( section 48(3) ).

Cumulative remedies clause

• General Contract and Boilerplate

Remedies for Breach of Contract: Legal Options Explained

In the event of a breach of contract, legal remedies are available to protect the non-breaching party's interests and compensate for losses incurred. Damages, specific performance, and injunctions are common remedies, while rescission and restitution offer an avenue for contract cancellation and restitution. Liquidated damages provisions can facilitate efficient dispute resolution, and declaratory relief provides clarity on contractual obligations. By exploring these legal options, parties can navigate the complexities of breach of contract and find a suitable remedy to restore their contractual rights. Further examination of these remedies can provide a clearer understanding of the legal avenues available.

Table of Contents

Damages for Breach of Contract

In the event of a breach of contract, the non-breaching party may be entitled to damages, which serve as a monetary remedy to compensate for losses incurred as a direct consequence of the breach.

The primary objective of damages is to restore the non-breaching party to the position they would have been in had the contract been fulfilled.

This can include compensation for contractual losses, such as lost profits, expenses incurred, and other direct consequences of the breach.

In some cases, punitive measures may be applied, aiming to punish the breaching party for their failure to uphold the contractual obligations.

The amount of damages awarded is typically determined by the court, taking into account the specific circumstances of the breach and the resulting losses.

It is crucial to note that the goal of damages is not to punish the breaching party but to provide a fair remedy to the non-breaching party.

Specific Performance Remedies

Specific performance remedies provide an equitable remedy where monetary damages are deemed inadequate, allowing the non-breaching party to seek the precise fulfillment of the contractual obligations.

This type of remedy is particularly useful in cases where the subject matter of the contract is unique or has sentimental value, making it difficult to quantify the loss. In such instances, the court may order the breaching party to fulfill their contractual obligations, maintaining contract compliance.

The court's intervention is vital in specific performance remedies, as it has the discretion to order the breaching party to perform their contractual obligations.

This remedy is often sought in cases involving the sale of land, intellectual property, or unique goods, where monetary damages would not be sufficient to compensate the non-breaching party.

By seeking specific performance, the non-breaching party can secure that the breaching party fulfills their contractual obligations, upholding the integrity of the contract and validating contract adherence.

This remedy provides a powerful tool for parties seeking to enforce their contractual rights and validate the terms of the contract are upheld.

Injunctions and Restraining Orders

Where legal remedies are sought to prevent further contractual breaches, injunctions and restraining orders provide a powerful tool for the non-breaching party to protect their interests.

These equitable remedies offer temporary relief, allowing the court to intervene and halt the breach, thereby preventing further harm.

Injunctions and restraining orders are often sought as emergency measures to preserve the status quo until a full trial can be held.

The purpose of these remedies is to maintain the contractual balance and prevent irreparable harm to the non-breaching party.

To obtain an injunction or restraining order, the non-breaching party must demonstrate that they will suffer irreparable harm if the breach is allowed to continue.

The court will then weigh the potential harm against the potential harm to the breaching party if the injunction is granted.

If the balance tips in favor of the non-breaching party, the court may grant the injunction or restraining order, providing a vital safeguard against further contractual breaches.

Rescission and Restitution

When a breach of contract occurs, rescission and restitution provide a distinct avenue for the non-breaching party to restore the pre-contractual state and recover any losses incurred.

Through contract cancellation, the non-breaching party can terminate the contract and seek restitution to restore the pre-contractual state. This remedy is particularly useful when the breach is material and the non-breaching party no longer wishes to fulfill their obligations under the contract.

The restitution process involves reversing the transaction and restoring the parties to their pre-contractual positions. This may involve the return of goods, services, or monies exchanged under the contract.

The goal of restitution is to put the parties back in the position they would have been in had the contract never been formed. By pursuing rescission and restitution, the non-breaching party can mitigate their losses and avoid further obligations under the breached contract.

Liquidated Damages Provisions

In addition to rescission and restitution, parties may also incorporate liquidated damages provisions into their contracts to provide a predetermined measure of damages in the event of a breach.

This provision enables parties to estimate the potential losses in advance, facilitating a more efficient dispute resolution process.

Liquidated damages provisions typically include a specific sum of money that the breaching party agrees to pay in the event of non-performance.

However, it is crucial to distinguish between liquidated damages and penalty clauses.

While penalty clauses are unenforceable, liquidated damages provisions are legally binding, provided they represent a reasonable estimate of the actual damages incurred.

Damage estimates should be based on a genuine attempt to quantify the potential losses, rather than serving as a deterrent or punishment.

Declaratory Relief Options

Through declaratory relief, parties to a contract can seek a judicial declaration of their rights and obligations under the agreement, thereby clarifying their contractual positions and potentially avoiding a breach of contract. This legal remedy allows parties to proactively address ambiguities or disputes arising from contract interpretation, rather than waiting for a breach to occur.

Declaratory relief can be particularly useful in situations where contract language is ambiguous or open to multiple interpretations. By seeking judicial review, parties can obtain a clear and authoritative interpretation of the contract terms, thereby avoiding potential disputes or litigation down the line.

Some key benefits of declaratory relief include:

Clarity and Certainty: Obtaining a judicial declaration of contractual rights and obligations provides clarity and certainty for all parties involved.

Contract Interpretation: Declaratory relief facilitates contract interpretation, allowing parties to understand their contractual positions and obligations.

Avoidance of Litigation: By resolving disputes through declaratory relief, parties can avoid costly and time-consuming litigation.

Preservation of Business Relationships: Declaratory relief can help preserve business relationships by resolving disputes in a proactive and constructive manner.

Frequently Asked Questions

Can i sue for breach of contract in small claims court?.

In small claims court, plaintiffs can sue for breach of contract, traversing court procedures to resolve contract disputes. However, jurisdictional limits and procedural rules apply, making it crucial to review local court rules and seek legal guidance.

What Are the Statute of Limitations for Breach of Contract Cases?

In breach of contract cases, understanding Time Barriers is essential, as Filing Deadlines vary by jurisdiction, typically ranging from 2-10 years, depending on the state and type of contract, thereby limiting the window for legal action.

Can I Negotiate a Settlement Out of Court?

When considering a settlement out of court, negotiating parties can leverage mediation benefits, such as confidentiality and flexibility, to craft a mutually beneficial agreement, employing a strategic settlement strategy to minimize litigation risks and costs.

Do I Need a Lawyer to File a Breach of Contract Lawsuit?

While not mandatory, hiring a lawyer to file a breach of contract lawsuit is highly recommended, as they can develop a case strategy, navigate complex legal procedures, and minimize legal fees, ultimately increasing the likelihood of a successful outcome.

Can I Sue for Emotional Distress Caused by a Breach of Contract?

In cases where a breach of contract causes significant emotional distress, plaintiffs may seek damages for Contract Anxiety and Emotional Damages, but proving a direct causal link between the breach and resulting emotional harm is vital for a successful claim.

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Home » Blog » Contract Remedies: Damages, Termination, and Performance

Contract Remedies: Damages, Termination, and Performance

• March 11, 2024
• Business , Contracts , Corporate

Understanding the array of remedies available is crucial for businesses seeking to enforce their contractual rights effectively. This guide aims to decode the complexities of contract remedies, delving into the nuances of damages, termination, and specific performance. By unraveling these legal intricacies, businesses can navigate contractual disputes with clarity. This way, they make sure that the appropriate remedies are employed to take care of their interests.

1. Damages: Compensation for Breach of Contract

Types of damages:.

• Explore the various types of damages, including compensatory, consequential, and punitive damages. Each serves a distinct purpose in addressing different aspects of a breach.

Compensatory Damages:

• Understand how compensatory damages aim to financially compensate the non-breaching party for the losses incurred due to the breach of contract.

Consequential Damages:

• Delve into the realm of consequential damages, which go beyond direct losses and address the indirect or special damages resulting from the breach.

Punitive Damages:

• Explore the rare but impactful realm of punitive damages, designed to punish the breaching party for willful misconduct or egregious behavior.

2. Termination: Ending the Contractual Relationship

Termination for breach:.

• Uncover the circumstances under which a party can end a contract due to the other party’s breach, and the legal implications of such termination.

Material Breach vs. Minor Breach:

• Differentiate between material breaches that go to the heart of the contract and minor breaches that may not significantly impact the overall agreement.

Right to Cure:

• Explore the concept of the right to cure, allowing the breaching party an opportunity to remedy the breach and avoid termination.

3. Specific Performance: Compelling Contractual Performance

Nature of specific performance:.

• Understand how specific performance is a judicial remedy that compels the breaching party to fulfill the terms of the contract, typically applicable in unique or irreplaceable situations.

When Specific Performance is Granted:

• Explore the conditions under which courts may grant specific performance, emphasizing the inadequacy of monetary damages as a remedy.

Limitations on Specific Performance:

• Recognize the limitations on specific performance, considering factors such as feasibility, fairness, and practicality.

4. Equitable Remedies: Injunctions and Rescission

Injunctions:.

• Delve into the concept of injunctions, which prohibit a party from engaging in certain actions, often employed to prevent irreparable harm.

Rescission:

• Understand the remedy of rescission, letting parties to undo a contract, returning both sides to their pre-contractual positions.

5. Liquidated Damages and Penalty Clauses

Liquidated damages:.

• Explore the use of liquidated damages clauses, where parties agree in advance on a specific amount to be paid in case of breach.

Penalty Clauses:

• Distinguish between valid liquidated damages clauses and unenforceable penalty clauses, understanding the legal considerations that impact their enforceability.

6. Mitigation of Damages: Responsibilities of the Non-Breaching Party

Duty to mitigate:.

• Recognize the duty of the non-breaching party to control damages by taking reasonable steps to minimize the impact of the breach.

7. Legal Costs and Attorneys’ Fees

Recovery of legal costs:.

• Understand the circumstances under which the prevailing party may recover legal costs and attorneys’ fees, providing an additional layer of compensation.

8. Conclusion: Navigating Contractual Disputes Strategically

As businesses walk through the complex landscape of contractual relationships, a nuanced understanding of contract remedies is important. Whether seeking compensation for breaches, terminating agreements, or compelling specific performance, the choice of remedy is strategic and depends on the unique circumstances of each case. For personalized guidance on contract remedies and strategic dispute resolution, contact Carbon Law Group. Our legal professionals specialize in contract law, offering custom solutions to empower businesses to enforce their contractual rights effectively.

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Remedies for Breach of Contract Explained | Illinois Contract Remedies

Key takeaways.

• Understanding the types of breaches—minor, material, actual, anticipatory—helps identify the appropriate legal remedy.
• Remedies for breach include compensatory, consequential, liquidated, nominal, punitive damages, offering varied compensation forms.
• Specific performance and injunctions serve as non-monetary remedies, forcing action or restraint in unique breach situations.

In this article...

When contracts are broken, knowing your remedies is crucial. What are the five remedies for breach of contract? The five remedies for breach of contract—compensatory, consequential, liquidated, nominal, and punitive damages—provide avenues for recourse and compensation. This article details each, helping you understand when and how they are applied to protect your rights in a breach. Expect to gain insights into the legal solutions available to you without needing to sift through legal jargon or complex explanations.

Understanding Breach of Contract

A breach of contract occurs in the realm of contract law when one party fails to perform as promised in the terms and conditions of a contract. This failure to fulfill obligations can lead to legal consequences, such as breach of contract lawsuits. Such breaches can take many forms, including:

• Minor breaches: characterized by less severe infractions, like performance delays
• Material breaches: take place when the item you receive greatly differs from what the contract terms and conditions specified. For instance, you ordered a red car but received a black one.
• Actual breaches: occur when one party fails to perform their obligations at the agreed-upon time
• Anticipatory breaches: happen when one party indicates that they will not be able to fulfill their obligations in the future

Understanding the different types of breaches can help you navigate the legal implications and seek appropriate remedies.

Actual breach is characterized as failing to meet obligations by the due date, or doing so improperly or incompletely, which can sometimes result in a material breach. For instance, if a builder fails to complete your home renovation by the agreed-upon date, it’s an actual breach, and depending on the severity, it could be considered a minor breach.

Meanwhile, an anticipatory breach signals future intentions of not performing the contractual duties. Say you’ve hired a band for your wedding, but two weeks before the event, they inform you they won’t be able to perform. That’s an anticipatory breach.

What is a Remedy in Contract Law?

In contract law, a “remedy” is a court-ordered resolution to one party’s breach of contract. A breach of contract occurs when one party to a contract has not fulfilled his or her obligation under the agreement. The non-breaching party is also known as the “injured” party, and the purpose of remedies is to place the injured party in the position they would have otherwise been in had the contract been performed as it was agreed upon.

Compensatory Damages for Breach of Contract Explained

Award of damages is the most common remedy for breach of contract as one party seeks compensation for financial losses as a result of breach of contract. The party who is injured by the breach of contract is entitled to the benefit (consideration) of the agreement they entered, or the net gain they would’ve accrued had it not been for the breach.  This type of remedy is known as “compensatory damages.”  

During the court case, the injured party becomes the plaintiff. In the instance of a total breach, the plaintiff may recover damages in an amount that’s equal to the sum or value they would have received had the contract been fully performed by the defendant.  Sometimes, this includes lost profits from a business operation.

If the breach is only partial and the defendant carried out a majority of the contract, the plaintiff may seek damages in an amount equal to the cost of hiring someone else to complete the performance. If the portion of the uncompleted performance is quite small in terms of cost, however, the court may only award damages in an amount that’s equal to the difference between the diminished value of the agreement as completed and the full value as stated in the contract.

Punitive Damages for Breach of Contract Explained

Compensatory, or actual damages, cover the loss the non-breaching party incurred as a result of the breach. Punitive damages, known as exemplary damages, are awarded to punish or make an example of the wrongdoing of a party that acted willfully, maliciously or fraudulently. Punitive damages are awarded in addition to compensatory damages.  However, punitive damages are rarely awarded in breach of contract cases. Punitive damages are most often used in tort cases in which personal harm was a result of the wrongdoing and actual damages are minimal.

Restitution in Breach of Contract Cases Explained

Restitution is remedy designed to restore the injured party to its state or position before the contract was created. Unlike an award of damages, parties seeking restitution may not demand compensation for lost profits or other financial losses caused by a breach. Instead, restitution is meant to return any money or property given to the defendant under the contract back to the plaintiff.

Typically, a party will seek restitution when a contract they entered has been voided by courts because of the defendant’s incompetence or incapacity. Contract law allows incompetent and incapacitated individuals to be relieved of their contractual obligations, but only if the plaintiff is not hindered by the dismissal. In either case, if the defendant received any money or property by means of the contract that is now voided, the plaintiff is to be restored of that money or property.

Rescission in Breach of Contract Cases Explained

Rescission is a remedy used to terminate a contract when parties entered into a contract by way of fraud, undue influence, coercion, or mistake. In the case of rescission, the contractual obligations of both parties are therefore terminated, and the contract will no longer exist.

Reformation in Breach of Contract Cases Explained

Reformation is similar to rescission as it’s a result of parties entering into a contract based on fraud, undue influence, coercion, or mistake, but rather than terminating the contract and the parties’ obligations entirely, the court will change the substance of a contract to correct the inequities suffered as a result.

Specific Performance of a Contract Explained

Specific performance is a remedy for breach of contract in which the court forces the breaching party to perform the services or deliver the goods the promised goods per the contract.  Specific Performance is only available when money damages are inadequate to compensate the plaintiff for a breach.  This remedy is typically used when the goods or services are so unique that no other remedy could suffice.

A good example is an individual who’s looking to buy a rare piece of art. He or she forms a contract with someone to obtain this piece of art. The buyer’s offer becomes the price for the piece of art and the other party accepts by a promise of delivering the art in exchange for the agreed amount. If the other party joins in this contract, yet fails to deliver the art, the buyer can take the case to court as a breach of contract. The court could rule specific performance the remedy for breach of contract, as the buyer would not be able to get this rare piece of art elsewhere. The defendant would then be required by the court to deliver the goods – in this case, the art – as agreed upon in the contract.

Injunctions

Contrarily, an injunction is a court order that either prohibits or compels parties to execute certain actions. For example, if a lifeguard equipment supplier breaches a contract by selling to a competitor, the court may issue an injunction to stop the supplier from making further sales to the competitor.

Injunctions can either be temporary, serving to maintain the status quo while litigation is ongoing, or permanent, issued after a case concludes to provide a long-term remedy. They play a pivotal role in preventing potential harm or maintaining the status quo in breach of contract disputes.

About the author

Kevin O’Flaherty is a graduate of the University of Iowa and Chicago-Kent College of Law. He has experience in litigation, estate planning, bankruptcy, real estate, and comprehensive business representation.

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What Are the Defenses to Breach of Contract?

Understand your defenses if you’re accused of breaching a contract.

Use these links to jump to different sections:

What Is a Breach of Contract? 

Material and immaterial breaches of contract , breach of contract defenses , questions for a contracts attorney .

“Breach of contract can go down in any number of ways,” says New York business attorney Sarah Gold .  

In general, “One party doesn’t do what they promised or were supposed to do” in the performance of the contract. 

If you’re sued or threatened with a breach of contract lawsuit, there are several potential defenses you can raise.  

This article will explain what a breach of contract is and cover some of the most common defenses to breach of contract. It’s best to raise as many defenses as possible.  

Once you understand your potential defenses, it’s a good idea to speak with an experienced contracts lawyer about your situation for the best outcome in your case. 

A contract can be about anything, from buying real estate to hiring someone to watch your pet. A valid contract obligates two or more parties to perform (or not perform) certain actions.  

If one of the parties fails to perform on their contractual obligations, they have breached the contract. Breaches typically involve : 

• Not performing at all 
• Not following the terms of the contract 
• Not performing in the agreed-upon timeframe 

As Gold says, a breach of contract can come about in many ways.  

Sometimes, “there can be a breach before the contract even gets going,” she says. For example, “if [the agreement] is a time-sensitive thing, and it’s supposed to happen like six weeks from now, but in week four the party’s warehouse burns down, then technically you have what’s called an anticipatory breach.” 

An anticipatory breach means “that [the contract] is going to go bad, but we haven’t hit the deadline yet.” 

Another type is “mutual rescission, meaning that both parties have decided they don’t want to go through with the contract anymore. This is effectively a breach of contract, but both parties agree to disagree and walk away,” says Gold. 

Some breaches of contract are more severe than others.  

Material breaches are so significant they completely ruin the contract.  

For example, say two parties agreed to a real estate transaction. The contract and other legal documents are completed, and the buyer pays the seller. Then the seller backs out.  

The seller’s refusal to sell is a material breach. It undercuts the entire point of the contract and leaves the buyer in a terrible position. 

Immaterial breaches are relatively minor. They are delays, inconveniences, or small deviances from the contract terms that can be fixed, saving the contractual agreement.  

For example, say you order a pair of expensive sunglasses for your spouse’s birthday. You are guaranteed the sunglasses two days before the date. However, the sunglasses don’t arrive until three days after the birthday.  

While the delay is an inconvenience, it doesn’t ultimately deprive you or your spouse of the enjoyment of the sunglasses.  

How do you know if a breach is material or immaterial? There is no hard and fast rule to determine this, and courts look at many factors. For example, if the breach could be fixed, then it was probably immaterial.  

Different remedies are available for a breach of contract, including: 

• Monetary damages 
• Specific performance, or getting a court to order the breaching party to do what they originally promised 
• Cancellation, when the non-breaching party legally backs out of the contract 

If you’re involved in a contract dispute over a breach, it’s a good idea to speak with a lawyer as soon as possible. A lawyer will be able to look at the facts of your situation and asses if the alleged breach is material or immaterial and the defenses to be raised. 

A breach of contract case is when one party files a civil lawsuit against the other party for breaching the contract terms. 

When this happens, the party accused of the breach can raise various defenses.  

As Gold says, “There are certainly defenses to breach of contract.” 

For example, take “the case of a widget or something that has actually been shipped but was never delivered.” In this case, “depending on what the terms of the contract say, the defense might be: you didn’t insure it; therefore, the minute it left our warehouse, that was on you. So, the fact that you never got it—not our problem.” 

Another defense is “you effectively couldn’t do it” because of reasons outside your control. “For example, during the Covid pandemic, certain things couldn’t occur because of governmental interference,” says Gold.  

“Or you can invoke an ‘act of God’ or [natural disaster] such as a hurricane” that prevents you from performing your part of the contract, she says.  

There are ways to account for these eventualities in a contract “if you’re thinking that far ahead,” says Gold. 

Other excuses don’t work as a defense against breaches. 

For example, “If a company were to make a contract and it turns out it’s going to be really expensive for them to complete it, that’s called commercial impossibility.” Usually, “you can’t get out of a contract for that.” 

“You can try, but [the cost is] kind of on the person who agreed to it,” says Gold. “You should have foreseen [the expenses involved]. So, while it does come up as a possible defense to breach of contract, it usually doesn’t work.” 

There are several other affirmative defenses to a breach of contract claim. Many argue that the contract was invalid in the first place, or that the party had a good reason not to perform.  

Common defenses include: 

• Legal incapacity . A party may argue they lacked the legal capacity to enter a contractual agreement in the first place. Individuals considered to lack capacity include minors (under 18 years of age), individuals with mental disabilities, or those who were coerced while under the influence.  
• Statute of limitations . Every state has statutes of limitations , which are laws that set deadlines for bringing a lawsuit. If the person who wants to sue misses the legal deadline, they are barred from bringing a lawsuit. In some cases, the party accused of breaching a contract can point out the deadline for a lawsuit has passed. 
• Statute of frauds . Not every contract must be in writing. But some must. A statute of frauds is a law that says what types of contracts must be in writing. For example, contracts for real estate, items over $500, or take more than a year to complete must be in writing and signed by all parties involved. If these contracts aren’t in writing, they’re invalid. If you have breached an oral contract that should have been in writing, you can argue the contract was invalid in the first place because it violated the statute of frauds. 
• Mutual mistake . This occurs when both parties are mistaken about the contract’s essential terms. When this happens, the party accused of a breach can point to this mutual mistake as their reason for backing out of the contract.  
• Lack of consideration . Every contract must involve exchanging something of value for something else of value. The thing of value is known as “consideration.” If there was no consideration, there was no valid contract. Instead, you might have had a gift, where one party simply gives something of value to someone else while receiving nothing in exchange. 
• Impossibility, impracticability, or frustration of purpose . These terms are related but distinct concepts. In general, these defenses allege the breaching party could not perform their contractual obligations because of factors beyond their control. They would have performed but couldn’t because circumstances made it impossible or impracticable to do so. Proving this will be highly fact sensitive.  
• Estoppel . Say a party agrees to a month-long delay in the delivery of products. The other party acts in good faith based on this statement. The first party can’t reverse course later and claim the delay was a breach. The party accused of a breach can point to the first party’s earlier statements accepting the delay and argue they are “stopped” from making a breach of contract claim. 
• Duress . The breaching party can argue they were coerced and had no free will in the formation of the contract and the contract was, therefore, invalid in the first place. 
• Fraudulent inducement . If a contract was based on misrepresentation, coercion, or undue influence, it’s invalid. 
• Illegality . If the contract is for something illegal, it’s unenforceable. The breaching party could argue that the contract was illegal. 
• Unconscionability . If a contract involves unfair bargaining power between the contracting parties or other unfair or manipulative practices, it may be deemed unconscionable and invalid. 

If you are facing contract litigation, speak with a contract attorney about your case and potential defenses to a contract breach as soon as possible. 

Many lawyers provide free consultations for potential clients. These meetings let you get legal advice and decide if the attorney or law firm meets your needs. 

To get the most out of a consultation, ask informed questions such as: 

• What are your attorney’s fees and billing options? 
• Did I breach the contract? 
• What are my best defenses against a breach of contract? 
• Can I settle this contract dispute without a lawsuit? 
• Is it possible to settle the dispute before it goes to trial? 

Once you have met with a lawyer and gotten your questions answered, you can begin an attorney-client relationship. 

Look for a contracts attorney in the Super Lawyers directory for legal help. 

What do I do next?

Additional contracts articles.

• What is Contract Law?
• When Should I Sue for Breach of Contract?
• How Do I Create a Legally Enforceable Contract?
• Five Things to Look For in Your Next Contract
• The Art of Drafting Contracts: Why Clarity Matters
• Do I Need a Lawyer to Draft Contracts for My Business?
• A Notary is Not a Lawyer

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• Business/Corporate

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What Is the Most Common Legal Remedy for a Breach of Contract?

By Lisa Burden, J.D. | Legally reviewed by Aviana Cooper, Esq. | Last reviewed June 06, 2024

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Contracts are a favorite tool of business owners everywhere. Business contracts lend assurance and definition to transactions. But what happens when someone doesn't do what they said they would in a  contract ? In the legal world, this is a " breach ," and there are several remedies for this situation.

For more information, see FindLaw's section on  Contract Law .

What Is Breach of Contract?

A contract is breached when a party fails to act in good faith or does not fulfill their obligations under the agreement. There are several types of contract breaches:

• Material breach:  A material breach of contract is a serious violation of the terms of a contract. Imagine you've ordered a certain make and model of a car, but the seller delivers a different model instead. This is a major violation because you're not getting what you explicitly requested. Thus, it constitutes a material breach of contract. Such a breach allows you, the injured party, to seek legal remedies such as damages or to terminate the contract and stop any further obligations.
• Minor breach:  A minor breach is often referred to as a "partial breach" or "immaterial breach." It occurs when a party to a contract fails to perform a small or less essential part of the contract. It's like ordering a car with upgraded wheels, but it arrives with standard wheels instead. While the seller hasn't fully delivered per your specifications, the essential item (the car) was delivered. In this situation, you typically can't terminate the contract. However, you might be able to seek damages to compensate for the missing upgraded wheels.
• Anticipatory breach:  An anticipatory breach happens when one party indicates — either through words or actions — that they will not be fulfilling their contractual obligations before they are due. Let's take another look at the car example. If the seller tells you a week before delivery that they won't be able to deliver the car, that's an anticipatory breach. You don't have to wait until the delivery date passes to take action. In anticipation of the breach, you can seek remedies such as terminating the contract or suing for damages.

When faced with one of these contract issues, the non-breaching party often resorts to legal action. Of course, there are several avenues for legal action, including mediation, arbitration, and litigation. Let's focus on the remedies available if a lawsuit is on the horizon.

Types of Remedies for a Party's Breach

There are two types of remedies for breach of contract:

• Monetary damages, which are also called a "remedy in law"
• Injunctive relief, which is also called an "equitable remedy"

Remedies in Law

Financial compensation is a common remedy for breach of contract. When lawyers talk about "remedies in law," they are talking about money damages. For breach of contract cases, there are several different types of monetary compensation remedies:

Compensatory Damages

This is the most common breach of contract remedy. When compensatory damages are awarded, a court orders the person who breached the contract to pay the other person enough money to get what they were promised in the contract.

For example, suppose you hire and pay someone to clean your house for $100, but they can't do it. You search for a new cleaning service, and the cheapest one will clean your house for $150. If this cost is reasonable, your first cleaner must pay you $150 in compensatory damages, allowing you to get your house professionally cleaned as the contract intended.

Restitution

When a court orders  restitution , they tell the person who breached the contract to repay the other person. In the example above, the court would order the first cleaner to pay you back $100 since that's what you paid him to clean your house.

Punitive Damages

Punitive damages  are a sum of money intended to punish the breaching party and are usually reserved for cases in which something morally reprehensible happened, such as a manufacturer deliberately selling a retailer unsafe or substandard goods.

Nominal Damages

A court awards nominal damages when there has been a breach of contract, but no party to the contract suffered any harm.

Liquidated Damages

These are damages that the parties agree to pay if a contract is breached. They agree to an amount ahead of time, and that amount is included in the contract terms.

Quantum Meruit

A court can award one party payment for what they deserve for any work they performed before the other party breached the contract. This is known as " quantum meruit ."

For example, if the cleaner in the example above had cleaned half the house, and then you decided you didn't want him to finish, he can demand $50 as quantum meruit. Translated from Latin, the term means "as much as he deserved."

Remedies in Equity

A remedy in equity is when the court orders someone to do something. This is also called "injunctive relief." In breach of contract cases, this can look like any of the following:

• Cancellation:  The court cancels the contract and decides the parties are no longer bound by it.
• Specific Performance:  This is when the  court forces the breaching party to perform the service  or deliver the goods promised in the contract. In other words, the breaching party must honor the terms of the contract. This is typically reserved for contract disputes when the goods or services are unique and no other remedy will suffice.

Facing a Breach of Contract Lawsuit? Protect Your Business and Call an Attorney

If you've been accused of breaching a contract in a legal action or believe another party has breached a contract with you, you'll need legal advice. A business lawyer can provide sound legal representation. Failing to seek the legal services of a contract lawyer can cost you a fortune or even your business. Find a  small business attorney  licensed to practice in your state to get started.

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Worksheet 19.2: Equitable Remedies and Recovery Based on Quasi Contract

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