When one party fails to fulfill its contractual obligations, the other party has several remedies available. These remedies aim to put the affected party in the position they would have been in without the breach. This blog explores four common remedies for a breach of contract.
Damages
Damages are the most common remedy. They aim to compensate a damaged party for the loss incurred due to the breach. There are several types of damages:
- Compensatory damages: they cover the direct loss suffered. For example, if a supplier fails to deliver goods on time, the buyer may claim the lost profit as compensatory damages.
- Liquidated damages: these are damages that the contract specifies in advance. They apply when actual damages are hard to calculate. For example, the contract might include a clause that fines the contractor for each day they delay the project.
- Nominal damages: these are small damages given when a breach happens, but the non-breaching party does not suffer a significant loss.
- Punitive damages: they aim to punish the breaching party for particularly harmful conduct. They are more common in cases involving fraud or malicious intent.
Specific performance
This remedy requires the breaching party to meet their obligations outlined in the contract. Parties use this remedy when money alone cannot fully cover the affected party’s loss. It helps make up for what money cannot fix.
Courts may require specific performance when the contract involves something unique or rare. Yet, it is not applicable in all cases, especially in service contracts. Forcing someone to perform personal services could violate constitutional prohibitions.
Rescission and restitution
When a breach of contract is severe, a damaged party may choose to cancel the contract altogether. Along with rescission, the affected party can seek restitution. This remedy aims to return them to their pre-contract position.
Alternative dispute resolution
Sometimes, parties may prefer to resolve their disputes outside of court. Methods like mediation and arbitration offer a quicker and less formal resolution. An experienced attorney can help the parties reach an acceptable agreement.
Understanding these remedies for breach of contract helps parties navigate the legal process. Knowing your options is crucial for protecting your rights and making informed decisions in a contract dispute.