A breach of contract occurs when an agreement between two or more parties is not fulfilled. When a breach of contract occurs, the injured party may seek to be compensated for their losses due to the breach.
There are several types of compensation, including monetary compensation and specific performance, that can be awarded by a court in breach of contract cases. Special damages are considered to be an indirect loss due to a breach of contract.
How is a Contract Formed?
A contract is a legal agreement between at least two parties. Contracts can be in writing or communicated verbally. Regardless if the contract is written or verbal, there are some components that all contracts must have in order to be considered a validly formed contract.
The required elements of a contract include:
- Offer: There must be a valid proposal, or offer, made. For example, a fictitious window company, Pane Less, offers to replace your broken living room window for $500.
- Acceptance: The offer made must be accepted. With the window replacement example, you accept the window work to be done for Pane Less’s offer of $500. Any change to the original offer is treated as a counteroffer which must in turn be accepted.
- Agreement: The parties involved must agree on the important terms of the contract before finalizing the deal. In the window example, you agree to hire and pay Pane Less $500 and they in turn agree to remove the old window and replace it with a new one.
- Certainty of Terms: This basically means that there are no unanswered questions within the contract. Some minor details, such as the date of completion for a job, can be left open ended and determined later.
- Consideration: The parties involved must each give something to the other party. For example, the window company will provide the service of removing the old window and installing a new window and you will give Pane Less $500 for their services.
Unfortunately, disagreements can arise between parties in a contractual agreement, which often results in a breach of contract.
What Constitutes a Breach of Contract?
Any action or inaction that basically breaks the terms of the original agreement between two or more parties constitutes a breach of contract. While contracts can be verbal or written it is always a good idea to get any contractual agreements in writing. If necessary, the written contract can be used as proof of the original agreement.
What is the Difference Between Special Damages and General Damages?
General damages are more common and directly stem from an unfulfilled contract. General damages aim to rectify the problems caused by a breach of contract. For example, if a contractor was hired to update a restaurant owner’s kitchen and fails to install an oven, the business owner can ask a court to award general damages. These funds will cover the cost to purchase the items needed as well as the cost to hire someone else to complete the job.
Additionally, the business owner can ask for special damages which might include revenue losses connected to a delay in construction. For instance, the lack of an oven in a restaurant may impact business.
People may not want to visit or return to a restaurant if the menu is limited to non-oven foods while the kitchen is under construction. This can negatively affect current income and future income as well as potentially tarnish the restaurant’s reputation. Special damages and general damages can be sought after and awarded to private individuals or businesses.
When Should Special Damages Be Awarded?
Examples of when special damages might be awarded include contract breaches that result in:
- Income lost due to a delay or cancellation of construction plans;
- A tarnished business or personal reputation; and/or
- Lost business opportunities because of circumstances surrounding the breach.
The court weighing in on the possibility of awarding special damages also reviews whether the special damages stem from the breach and whether the damages were foreseeable.
What are Some Defenses to Breach of Contract?
There are several defenses, or valid excuses, that a court may consider in a breach of contract case. These can include:
- Mistake: A mistake by one or more of the parties involved in the contract can be taken under consideration by the court and depending on the circumstances may be a valid defense.
- Duress: If a contract was made under duress or a forceful situation, such as kidnapping, the breach and the contract may be deemed invalid by the court.
- Fraud, Unconscionability: The court reviews every matter on a case-by-case basis and if there is some sort of foul play involved, it may be a defense to breach of contract.
- Impossibility: If after the contract is agreed upon, it becomes impossible for one of the parties to fulfill their end of the bargain, a court may consider this to be a valid defense.
If questions arise regarding a potential breach of contract, the court will review the circumstances of each contract independently to determine the outcome.
Do I Need an Attorney If I Want Special Damages in a Breach of Contract?
Contract disputes often arise between parties. It is important to speak to a knowledgeable and experienced contract attorney in your area to discuss the particulars of your case. They will be able to provide you with the best options available in order to resolve your dispute.