A contract that is legally enforceable in court in Pennsylvania must be the result of an offer by one party, acceptance of the offer by another party and an exchange of consideration, i.e., something of value such as money paid for the delivery of goods.
If a contract is to be valid, i.e., one that a court will enforce, the offer must be a clear proposal with specific terms. In turn, acceptance must be a clear agreement to the terms of the offer without change by the party who accepts the offer. Pennsylvania courts have refused to enforce a contract when the acceptance involves even minor deviations from the terms of the offer.
When one party to a contract commits a material breach of the contract, the other party has grounds to file a lawsuit for breach of contract against that person. Such a lawsuit would be a civil action, which means that money damages for breach of contract and other civil remedies would be the relief available to the party who has been harmed by the breach.
The types of relief available for breach of contract are as follows:
- Compensatory Damages: Compensatory damages are designed to restore the party who did not breach the contract
- Specific Performance: When a court awards a non-breaching party the remedy of specific performance, it orders the breaching party to perform as it promised in the contract. A court would do this when an award of money damages or another remedy would not be sufficient to compensate the non-breaching party for harm or loss caused by the breach. A court might do this if the contract involved the exchange of unique item of real or personal property.
- Restitution: If a court orders the party that breached a contract to make restitution, the party must return to the other party everything of value that they have received from the other party. What is returned might be money or it might be goods or even services, or the value of services the breaching party received.
- Rescission of Contract: The parties to a contract may cancel it under certain circumstances and this is rescission. Rescission might be the preferred remedy if the contract was entered into because of one party’s fraudulent misrepresentation.
- Reformation: This is a remedy that would be used rarely in certain limited circumstances. Basically, for some reason, a contract does not correctly reflect the important information about an agreement. In this case, reformation would be used to modify some particular provision or term in order to make it accurately reflect that agreement the parties intended to make when they reached an agreement.
- The need for reformation could arise when circumstances outside the contract change, or when laws change. These events might demand changing the agreement to keep its terms consistent with changed facts. Or it could arise if the contract contains some plain error, e.g., the name of a party is incorrect or some equivalent error has been made.
- Liquidated Damages: A contract may contain a liquidated damages clause. This is a provision that specifies how much a party has to pay in the event they breach the contract. Parties cannot choose any amount they might want to specify is a liquidated damages clause.
- Pennsylvania courts have ruled that the amount of liquidated damages must be a reasonable forecast of the actual economic harm that could result to one party if the other breaches the contract. If the amount appears to be a penalty that bears no relationship to a measure of possible actual damages, then a court might refuse to enforce it.
- Nominal Damages: Nominal damages are damages in a very small amount that are awarded if a party breached a contract but the breach did not cause any meaningful economic loss to the non-breaching party.
- Punitive Damages: Punitive damages are damages that are awarded for the express purpose of punishing a party who is civilly liable for the breach of contract or other misconduct. An award of punitive damages might be quite large, depending on how egregious the conduct of the responsible party was. Punitive damages are only awarded rarely.
- Termination of a Contract: A contract can be terminated for a variety of reasons. The parties might agree to the termination of a contract. If they both agree, there is no legal reason that would prevent it.
- If one party completely fails to perform, the other could be justified in simply terminating the contract. If external circumstances were to make it impossible to perform, a party might cancel.
- It would be critical for the party who wants to cancel a contract to give the other party notice of their intent to cancel. A party who believes they have grounds to terminate a contract might want a Pennsylvania lawyer consultation to confirm that they have grounds and to help them with giving notice.
- Injunctions: If one party to a contract were to signal their intent to breach the contract, the other party could go to court to get an injunction. The injunction would order the other party not to breach the contract but rather to perform as agreed.
