In lawsuits that involve breach of contract, the injured party will often be awarded monetary damages to compensate for the harm caused by the breach. However, in some cases, monetary damages are not sufficient and do not properly resolve the breach. In these situations, equitable remedies may be awarded as a means to mend the breach by requiring the parties to take steps toward correcting the breach.
Equitable remedies include:
- Specific Performance: When specific performance is ordered, the breaching party must take action to fulfill their part of the agreement.
- Contract Rescission: Quite simply, contract rescission means agreeing to a different deal. When one party breaks the original deal, the other party is no longer bound to the agreement. However, both entered the contract because they have mutual interests, and it may be likely that both sides still want something from the other. Rescission allows the contract to be adjusted so that both parties agree on the new terms.
- Contract Reformation: Reformation is a means to clarify something in the contract that was a mistake, misunderstanding, or one party’s failure to disclose important information pertaining to the contract.
- For example, a stadium thought they ordered 1000 bleachers, but the bleacher company delivered 100. The person who typed the order accidentally left a zero off the quantity needed in the order, so now, the contract would have to be re-written to correct the typo.
- Injunction: In some cases, a court-ordered injunction may be placed on one party. An injunction is a type of court order that requires a party to either do something or stop doing something that could be harmful. It is a tool the court uses to maintain or restore the status quo.
Equitable remedies may also be used in situations where the parties want to make the situation work, and the court wants to find a way to help the agreement go forward. It could mean that the contract needs to be complete re-written or that the parties need a chance to completely re-approach the situation. Either way, equitable remedies for a breach of contract gives parties to contracts a wide variety of options in case something goes wrong.
In its broadest sense, equity refers to fairness. In order to address fairness in court, defenses to equitable remedies may include:
- Mistake: When a mistake occurs, it can prevent one party from recovering. If the mistake was mutual, recovery may also be limited.
- Hardship: If an equitable remedy were to cause undue hardship for the breaching party, the court will not issue such remedy.
- Unclean Hands: This type of defense refers to both parties committing the same type of breach. As such, and under the principles of equitable defense, the party who is seeking relief cannot have breached the contract in a similar way.
- Laches: This occurs when the non-breaching party purposely delays bringing forth a lawsuit for breach of contract, which in turn, results in prejudice to the breaching party.
- Unconscionable Contract: No remedy is possible if the contract was unconscionable. This means that the agreement was unfair for one party, or it was one-sided.
- Illegal Contract: Illegal contracts, such as: prostitution, gambling, drug distribution, and other illegal acts cannot be enforced legally, or under equitable principles.
- Misrepresentation: When a contract is created, but fraud, lying, or deceit took place, it may be unenforceable.
- Undue Influence: If one party uses her position of authority to pressure or take advantage of the other, equitable relief may not be available.
- Duress: Duress refers to someone being pressured or threatened in any way during the formation of the contract. For instance, if one party threatens to harm the other party’s loved ones if the contract is not formed or performed upon, a defense of duress may be used.
Importantly, the person seeking equitable remedy should have a clean record, and must not have violated the law. Of all the equitable defenses, the two most common are unclean hands and laches.
If the party who violated the contract has a valid defense for doing so, then equitable relief is not available. Equitable remedies will only be available when legal remedies such as monetary damages cannot resolve the breach. Because equitable relief does not provide monetary compensation, it usually comes in the form of the parties taking certain actions which will remedy the breach.
The defenses used for something like the performance of a contract may differ from the defenses used for contract rescission. As such, consult an experienced contracts attorney for guidance on your case.
If you have questions regarding breach of contract equitable defenses, you should contact a local contract attorney with experience in contracts. Your lawyer will go over all of your options relating to your case, and will advise you on the best course of action in proceeding further. If necessary, your lawyer will also represent your best interests in court.