A contract is an agreement between two or more individuals or entities that creates legal obligations as outlined in the contract. Contracts may be in oral or written forms, but there are some which are required to be in writing in order to be enforceable.
There are three main ways in which a party can breach a contract, including:
- Anticipatory breach;
- Minor breach; and
- Material or fundamental breach.
Anticipatory breach is referred to as anticipatory repudiation. This type of breach occurs when a breaching party tells a non-breaching party that they will not be providing the performance which was promised in the contract. Once the non-breaching party is notified, they may be able to sue for a breach of contract.
A minor breach of contract occurs when one party fails to perform a minor aspect of the performance under the contract. With a minor breach, the entire contract has not been violated and it may still be substantially performed.
An issue may arise if there is some type of technical error in the contract, such as:
- A wrong date;
- An incorrect price; or
- A type in the contract.
The most common type of breach which is the basis for a breach of contract claim is a material or fundamental breach. This type of breach is so substantial that it, in effect, cancels the contract because it renders the performance of either party impossible.
Contracts may also be breached if:
- They are fraudulent;
- They were formed illegally or are unconscionable; or
- If there is a mistake of fact in the terms of the contract.
The parties may include a clause which is unique to their contract which specifies when the actions of the party may be considered a breach. In addition, state laws as well as the type of contract, such as lease agreements, sales contracts, or government contracts, may indicate other ways in which contracts may be breached.
What are the Remedies to a Breach of Contract?
If one or more of the parties to a contract do not perform according to the terms of their contract, a breach of the contract has occurred. The remedies for a breach of contract include:
- A remedy specified in the contract itself, such as liquidated damages;
- An award of money damages;
- Reformation; and
- Specific performance.
What is an Equitable Remedy?
An equitable remedy is a remedy which may be ordered by a court in a breach of contract case. Generally, remedies are divided into two categories, legal remedies and equitable remedies.
A legal remedy is a remedy which allows the non-breaching party to recover compensatory damages, or money damages. Equitable remedies, on the other hand, are actions which a court must prescribe.
Equitable remedies are often used in order to resolve a substantial breach or contract dispute where money damages would not be sufficient to resolve the issue or to protect the parties from harm. In addition, an equitable remedy is typically not available as an option unless the parties can demonstrate to the court that legal damages would not be sufficient to resolve their contract case.
What Equitable Remedies are Available for a Breach of Contract Dispute?
An equitable remedy is typically provided by a court when a material breach of contract occurs. Generally, there are three equitable remedies which parties may receive from a court, including:
Contract reformation allows the parties to rewrite their original contract in a way which reflects the true intentions of the parties more accurately. In order for the parties to receive this remedy, they must have an existing valid contract or there would be no contract to rewrite.
Additionally, contract reformation is often permitted in cases where a mistake or misrepresentation of a portion of the contract terms occurred. In contrast to contract rescissions, contract reformation can allow the contract to be reformed in whole or in part, which is why it may also be referred to as rectification.
Specific performance requires each party to fully perform their obligations under the contract according to the terms which were laid out in the agreement. For example, it may include requiring the breaching party to deliver goods which the non-breaching party previously paid for or to render payment to a party for their services provided.
Contract rescission occurs when the court orders the parties to terminate or cancel the entire contract. The main purpose of contract rescission is to place the parties in the same position which they were in prior to entering into the contract.
Contract rescission helps reduce the cost of damages which are done to both parties. It also releases both parties from being required to perform their part of the agreement.
The parties may also request that the court issue an injunction against a party who has breached the contract. An injunction is a court order which requires a party either take a specific action or refrain from taking a particular action.
For example, although a court will typically not order a party to complete a job, it may issue an injunction which prevents that party from seeking employment at companies which are considered to be competitors of their original employer. The circumstances of the breach of the contract will typically dictate what equitable remedy a court will agree to enforce.
This is because a court has a great amount of discretion when addressing an issue which calls for equitable relief. A court will consider several factors prior to issuing a ruling, including the prior business dealings of the parties or the respective bargaining power of the parties.
Can I Obtain Both Legal and Equitable Remedies?
A party is usually required to seek a legal remedy, such as a compensatory or monetary damages award before a court will consider granting an equitable remedy. In other words, if the parties are not able to show that money will not fix their contract dispute, they will likely not be eligible to receive any of the equitable remedies discussed above.
There are certain situations in which a party to a contract may be able to receive monetary compensation under the rules of equity. These damages are called restitutionary damages, and are an extremely specific and very limited type of damages available in a breach of contract case.
Restitutionary damages are used to prevent one party from being unjustly enriched for their breach. For example, if a non-breaching party has delivered the goods as agreed but the other party has not yet paid for the goods, the court may order the breaching party to pay restitutionary damages so that they will not receive the agreed upon benefit for free and at the expense of the non-breaching party.
Do I Need to Hire a Lawyer for Help with Breach of Contract Remedies?
It is essential to have the assistance of a contract attorney for any issues, questions, or concerns you may have regarding a breach of contract remedy. An equitable remedy is often tailored to an individual contract as well as the circumstances of the parties.
Your attorney can review your contract and the facts of your case to determine whether or not an equitable remedy may be available in your situation. In addition, your attorney can assist you with drafting your contract, which can help avoid disputes from arising and errors from occurring.