A contract is an agreement that is usually between two parties. Contracts typically outline the rules that each party must follow; if a party fails to do what they said they would, the other party may be entitled to compensation.
In some cases, when a party breaks their promise, known as breach of contract, the damage done to the other party is minimal. In these cases, remedies may include specific performance, contract rescission, or contract modification.
However, in other cases, the damage can be extensive. This means the breaching party may be ordered to pay a large sum of money, known as damages, to help bring the injured party back to where they were before the breach of contract.
What Damages Can Be Awarded in a Breach of Contract?
Damages are an award that are paid to a party who has suffered loss or injury. There are several different types of monetary remedies in law, including:
- Compensatory Damages: This is the most common remedy for breach of contract. Usually, when compensatory damages are ordered, the breaching party must pay the other party what was promised elsewhere in the contract.
- For instance, pretend that you hired a caterer for $1000, but they were unable to do what they said. You had to find another caterer, but the cost was $1500. If the court thinks it reasonable, the original caterer may have to pay you $1500 in compensatory damages.
- Restitution: When restitution is ordered, the breaching party is required to pay the other party back. In the above example, the court would order the original caterer to pay you the $1000 that you paid her to cater your party.
- Liquidated Damages: Agreed-upon damages that the parties say they will pay in the event of a contract breach.
- Nominal Damages: Awarded when no party suffered harm after a breach of contract.
- Quantum Meruit: Awarded to a party as payment for any performance prior to the other party’s breach of contract. For instance, if a house cleaner cleaned part of a person’s house, and that person decided she didn’t want him to finish cleaning the rest of the house, the court could order the homeowner to pay for the work completed.
- Remedies in Equity: A remedy in equity is when the court orders a party to do something, also known as injunctive relief. This could be in the form of a cancellation of the contract, which releases the parties from the agreement. It could also be in the form of a specific performance, which forces the breaching party to deliver the goods or perform the service they promised in the contract.
- Punitive Damages: Reserved for cases in which a party acted in a morally reprehensible way, punitive damages are intended to punish the offending party.
What Other Remedies Are Available If There Has Been a Breach of Contract?
As mentioned, equitable remedies require the ordered party to act or refrain from acting in some way. The court could order:
- Specific Performance: which requires the breaching party to perform their part of the contract.
- Contract Rescission: which would cancel the contract. In this case, it would be possible to form a new contract that suits both parties.
- Contract Reformation: the contract is rewritten so that the intentions of both parties are well-represented and expressed.
Specific performance isn’t always available, for example, if it is impossible for the contract to be completed. While the non-breaching party might want the contract to be completed, the court cannot order the breaching party to complete the impossible.
A contract rescission would put the parties in the situation they were before the contract was formed; as if the contract never existed. This means that any money or goods exchanged during the contract would need to be returned. While it allows both parties to form a new, different contract, it is often used in situations where a party was fraudulently induced to sign the contract.
Contract reformation can be used for something as simple as a mistake/error in the contract, like a misplaced comma that turns $12,000 into $120,000. It can also be used in cases of fraud, if the other party still wants to enter a contract and the fraudulent party agrees to fix the contract.
Do I Need an Attorney?
If you have any questions regarding the damages available for breach of contract, you should contact a local business lawyer. An experienced attorney will review your contract and advise you of your best course of action. If necessary, your lawyer will also represent your best interests in court.