Contracts are agreements between two or more private parties which create mutual legal obligations. A contract may be written or oral and it is important to be aware that an oral contract is more challenging to enforce and should be avoided when possible.
There are some types of contracts which are required to be in writing in order to be considered valid. For example, contracts for an amount of money over $500.
In order to be valid and enforceable, contracts are required to have certain elements, including:
- An offer;
- Acceptance of the offer presented; and
- Valuable consideration from the parties to the contract.
A contract must also include provisions for the time or event when performance must be made and the terms and conditions for the performance. In order for the parties to fulfill their obligations under the contract, they must perform their duties.
There are certain types of contracts which fall under the Statute of Frauds and will not be enforced unless they are in writing. These types of contracts include:
- Marriage contracts;
- Contracts which will not be performed within a year;
- Interest in land contracts;
- A promise to pay the debt of a decedent; and
- The sale of goods over a specific amount.
The majority of contracts are governed by state statutes. It is therefore important for individuals to review local laws if a contract issue arises.
What is Considered a Breach of a Contract?
A breach of contract occurs when a party fails to fulfill their obligations under the contract. If one party violates a contract, the other party will likely suffer economic losses.
For example, if an individual hired a construction company to complete a project by a specific deadline and that company failed to do so, the individual who hired them will likely suffer a financial loss due to that failure. There are numerous options which may be available to the non-breaching party to compensate them for their losses.
The non-breaching party may be able to:
- Sue the breaching party for damages;
- Demand specific performance; or
- Terminate the contract.
Which remedy is awarded as well as the amount of compensation will be determined by the court or jury.
What are Equitable Defenses for a Breach of Contract?
When two or more parties enter into a contract, they make a promise to uphold their end of the bargain based upon the terms of the contract which are agreed to by the parties involved. If one party fails to perform their duties under the contract as they agreed to do, they may be held legally responsible for a breach of contract.
In the majority of breach cases, the non-breaching party files a lawsuit which seeks monetary damages that they suffered as a result of the breach. In some cases, however, monetary damages will not provide the non-breaching party with proper compensation.
For these individuals, one available alternative is to seek an equitable remedy in a breach of contract lawsuit.
What is an Equitable Remedy?
An equitable remedy is designed to provide legal relief to a non-breaching party in a contractual relationship. The majority of breach of contract lawsuits seek monetary damages.
There are, however, some situations in which money alone will not properly compensate the non-breaching party. In these types of cases, there are several alternative options.
The most commonly awarded equitable remedies include:
- Specific performance. The non-breaching party, or defendant, is ordered to fulfill their obligations under the contract;
- Rescission. The parties agree to different terms for their contract. The original contract is still enforceable following the breach, the non-breaching party may opt to form a new contract with different language. This typically applies when the non-breaching party’s interests are better served than if they seek just monetary damages;
- Reformation. This remedy is used to clarify contract language if the original contract contained:
- a mistake;
- a misunderstanding; or
- lacked important information. Common examples include:
- Typos or misprints of:
- quantity; or
- dates; and
- Typos or misprints of:
- Injunction. An injunction is an order from the court to cease a certain activity or to perform an action. It is designed to return the contractual situation to its original status. This remedy is commonly used outside of contract litigation as well.
Are There Any Defenses to Equitable Remedies?
As in the majority of civil lawsuits, there are several possible defenses which may apply to a lawsuit which is seeking an equitable remedy. Many of these defenses can also apply to lawsuits which seek monetary damages.
Defenses which may be available to equitable remedies include:
- Undue influence, which occurs when the party seeking equitable relief attempts to take unfair advantage of a position of authority or other power against a breaching party;
- Duress, which occurs when one party is illegally pressured or threatened into a contractual relationship, or to accept certain contractual terms. For example, if X forces Y to agree to sell their car for $50.00 or else they will fire Y’s wife, a court will say that X cannot force specific performance due to the threat;
- Laches, which is a legal technique where the non-breaching party delays in bringing a lawsuit for the specific purpose of causing unnecessary harm to the breaching party;
- Illegality. A contract which contains agreements for an illegal act, such as drug trafficking or murder is unenforceable;
- Unconscionability. If terms of the contract are unreasonably unfair or oppressive to one party in a way that indicates abuse during the formation of the contract, a court may refuse an equitable remedy. one common reason that courts find a contract unconscionable is through grossly one-sided bargaining power during contract negotiation and formation;
- Misrepresentation. If the non-breaching party lied or made misrepresentations to the other parties during the negotiation and formation of the contract, a court may refuse to grant the equitable remedy that the non-breaching party seeks;
- Unclean hands, which is a defense that only applies when both parties have committed a wrong, typically the same type of breach to the contractual agreement. A court may then refuse to enforce the contract as well as any equitable remedies that either side may seek;
- Mistake, which occurs when a factual or legal mistake is made that makes the contract unenforceable; and
- Hardship, which is a defense that is cited when a plaintiff can prove that a breach has occurred but forcing the breaching party to perform would cause severe hardship. The hardship must be significant and material. This defense is rarely granted.
If a non-breaching party seeks either monetary damages or equitable relief, it is important to ensure that none of the violations above apply to the party’s actions during the contractual process. If that is done, a court is more likely to approve the equitable remedy.
Do I Need a Lawyer to Help with Equitable Remedy Defenses?
It is essential to have the assistance of a contract attorney for any issues, questions, or concerns you may have related to an equitable remedy. Legal issues may quickly become complex and overwhelming, and contract issues are no exception.
This is further complicated by the fact that each state has its own laws which govern contract breaches and may define contract terms in different ways. Your lawyer can advise you of the laws in your state, review your contract, and determine what remedies may be available.
Your lawyer will represent you in court should a dispute arise related to your contract.