A breach of contract happens when a contract between two or more parties is not fulfilled. When a breach of contract happens, the injured party may seek to be compensated for their losses from the breach.
A court can award many kinds of compensation, including monetary compensation and specific performance, in breach of contract claims. Special damages are indirect losses due to a breach of contract.
How is a Contract Started?
A contract is a legal arrangement between at least two parties. Contracts can be in writing or conveyed verbally. Regardless of whether the contract is written or spoken, there are some features that all agreements must have to be considered a validly created contract.
The necessary components of a contract include:
- Offer: There must be a valid proposal or offer made. For instance, a fictional window business, Pane Less, proposes to fix your broken living room window for $400.
- Acceptance: The offer made must be accepted. With the window replacement illustration, you accept the window work to be done for Pane Less’s offer of $400. Any change to the initial proposal is treated as a counteroffer, which must be accepted.
- Agreement: The parties involved must agree on the necessary terms of the contract before finishing the contract. In the window model, you agree to employ and pay Pane Less $400, and they, in turn, agree to remove the broken window and substitute it with a new one.
- Certainty of Terms: This means there are no unanswered questions within the agreement. Some insignificant details, such as the completion date for a job, can be left open-ended and decided afterward.
- Consideration: The parties implicated must each give something to the other party. For instance, the window business will supply the benefit of removing the broken window and installing a new window, and you will deliver Pane Less $400 for their assistance.
Sadly, conflicts can arise between parties in a contractual deal, which frequently results in a breach of contract.
What Comprises a Breach of Contract?
Any act or inactivity that breaks the initial contract terms between two or more parties constitutes a breach of contract. While agreements can be spoken or written, getting any contractual arrangements in writing is always helpful. If necessary, the written contract can be used to prove the initial agreement.
What Damages Can Be Awarded?
Compensatory damages cover the non-breaching party’s loss due to the breach of contract. The amount awarded is intended to make right or return the loss caused by the breach.
There are two types of compensatory damages that the non-breaching party may be allowed to recover.
General damages cover the loss directly incurred by the breach. General damages are the most standard type of damages awarded for contract violations.
Special damages cover any loss incurred by the breach of contract because of exceptional occurrences or situations that are not ordinarily predictable. These are actual losses driven by the breach, but not directly and immediately. To obtain special damages, the non-breaching party must demonstrate that the breaching party knew of the particular circumstances or conditions when the contract was signed.
Punitive damages are awarded for disciplining or exemplifying an offender who has acted intentionally, cruelly, or fraudulently. Unlike compensatory damages intended to cover exact loss, punitive damages are designed to penalize wrongdoers for heinous conduct and prevent others from behaving likewise. Punitive damages are awarded in addition to compensatory damages.
Punitive damages are seldom awarded for breach of contract. They often appear in tort cases to penalize intentional or irresponsible wrongdoing resulting in personal harm.
How are Compensatory Damages Calculated?
The estimation of compensatory damages hinges on the breach’s kind of agreement and the sort of loss that was incurred. Some general guidelines include:
The traditional measure of damages is a payment that would let the non-breaching party purchase a replacement for the benefit that would have been obtained if the agreement had been fulfilled. In circumstances where the replacement cost is hypothetical, the non-breaching party may recover damages in the amount of the cost incurred in executing that party’s responsibilities under the contract.
Contracts for the Sale of Goods
The damages are gauged by the discrepancy between the contract price and the market price when the seller delivers the goods or when the buyer learns of the breach.
Are There Any Limitations on the Award of Compensatory Damages?
A significant limitation on the award of damages is the obligation to mitigate. The non-breaching party must mitigate or minimize damages to the extent sensible. Damages cannot be recovered for losses that could have been reasonably evaded or substantially reduced after the breach happened. The non-breaching party’s failure to use proper diligence in mitigating the damages suggests that any award of damages will be decreased by the amount that could have been reasonably bypassed.
What is the Distinction Between Special Damages and General Damages?
General damages are more typical and directly originate from an unfulfilled agreement. General damages aim to fix the issues caused by a breach of contract. For instance, if a contractor was employed to modernize a cafe owner’s kitchen and fails to install an oven, the cafe owner can request a court to award general damages. These funds will cover the fee for buying the things needed and employing somebody else to finish the assignment.
When Should Special Damages Be Awarded?
Instances when special damages might be awarded include contract breaches that result in:
- Earnings lost due to hesitation or revocation of construction projects;
- A tainted industry or personal reputation; or
- Lost business prospects because of events surrounding the breach.
Considering the prospect of awarding special damages, the court also examines whether the special damages originate from the breach and whether the damages were foreseeable.
What Are Some Defenses to Breach of Contract?
A court may consider multiple defenses or reasonable justifications in a breach of contract claim. These can include:
- Mistake: A mistake by one or more of the parties implicated in the contract can be taken under review by the court and, depending on the circumstances, may be a reasonable defense.
- Duress: If a contract was created under duress or a violent condition, such as kidnapping, the breach, and the contract may be considered nullified by the court.
- Unconscionability: The court examines every issue on a case-by-case basis, and if there is foul play involved, it may be a defense to breach of contract.
- Impossibility: If it becomes unattainable for one of the parties to satisfy their end of the deal after the contract is agreed upon, a court may believe this to be a reasonable justification.
If questions emerge concerning a potential breach of contract, the court will examine the circumstances of each contract independently to determine the consequence.
Do I Need a Lawyer if I Desire Special Damages in a Breach of Contract?
Contract disputes often arise between parties. It is crucial to speak to a knowledgeable and experienced contract attorney in your region to discuss the details of your case. They will be able to furnish you with the best options available to resolve your dispute.