When two or more parties enter into a contract, they are making a promise to uphold their end of a bargain based on the terms agreed to by those involved. If someone fails to perform their duties under the contract as agreed, they can be held legally responsible for breaking it. This is known as a breach of contract.
In most of these cases, the non-breaching party will file a lawsuit seeking monetary damages that they suffered as a result of the contract being broken, but sometimes monetary damages will not provide proper compensation. For these plaintiffs, the alternative is to seek an equitable remedy in their breach of contract suit.
What is an Equitable Remedy?
Equitable remedies are designed to give legal relief to a non-breaching party in a contractual relationship. The large majority of breach lawsuits seek monetary damages, but there are some situations where money alone will not properly compensate the harmed party. In these cases, there are a handful of alternative options. The most commonly used equitable remedies are:
- Specific performance: The defendant is ordered to fulfill their part of the agreement.
- Recission: The parties agree to a deal under different terms. Although the original contract is enforceable after the breach, the non-breaching party may opt to form a new one with different language. This usually happens when the non-breaching party’s interests are served better than seeking just monetary damages.
- Reformation: This remedy is used to clarify contract language if the original contained a mistake, misunderstanding, or lack of important information. Examples include typos/misprints of price, quantity, and date.
- Injunction: An injunction is a judicial order to stop an action or to perform one, and is designed to return the contractual situation to the status quo. It is a commonly used civil litigation tool outside of contract law as well.
Are There Any Defenses to Equitable Remedies?
Just like most civil lawsuits, there are a number of possible defenses that can apply to a cause seeking an equitable remedy. Although many of these can apply to lawsuits seeking monetary damages as well, having an understanding of these defenses and how they may apply to an equitable remedy situation can make a huge difference.
- Undue Influence: If the party seeking equitable relief tries to take unfair advantage of a position of authority or other power against a breaching party, the court may deny them equitable relief.
- Duress: This occurs when a party is illegally pressured or threatened into a contractual relationship, or to accept certain contractual terms. For example, if A forces B to agree to sell their car for $50.00 or else they will fire B’s wife, a court will say that A cannot force specific performance due to the threat.
- Laches: This 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: Any contract that contains agreements for illegal acts (drug trafficking, prostitution, etc.) is unenforceable.
- Unconscionability: If terms of a contract are unreasonably unfair or oppressive to one party in a way that suggests abuse during its formation, a court may refuse an equitable remedy. A common reason that a court finds a contract unconscionable is through grossly one-sided bargaining power during negotiation and formation.
- Misrepresentation. If the non-breaching party lied or made misrepresentations to the other parties during the contract’s negotiation and formation, a court may refuse to grant an equitable remedy that the non-breaching party seeks.
- Unclean Hands:. This defense only applies when both sides have committed a wrong, usually the same type of breach to the contractual agreement. A court may then refuse to enforce the contract, and therefore any equitable remedies that either side may seek.
- Mistake: A factual or legal mistake makes the contract unenforceable.
- Hardship: This defense is cited when a plaintiff can prove that a breach has occured, but forcing the breaching party to perform an equitable remedy would cause severe hardship. The hardship must be significant and material, and as a defense is rarely granted.
If the non-breaching party seeks either monetary damages or equitable relief, it is important to make sure that none of the above violations can apply to their actions during the contractual process. This way, the likelihood of a court approving an equitable remedy is much more likely.
Do I Need a Lawyer to Help with Equitable Remedy Defenses?
All legal issues can quickly become complicated and overwhelming, and contract disputes are no exception. It is important to remember that each state has their own laws concerning contract breaches and may define terms in different ways. Seeking the help of an experienced contract attorney in your area is one of the best ways to ensure that your rights are protected and that you are pursuing the best legal solution possible.