The Ultimate Guide to Remedies for Breach of Contract
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How to Form a Valid Contract
A contract is an agreement between two parties creating obligations enforceable by law. For there to be a valid contract, there must be:
- Mutual assent between the parties to enter the agreement
- Some form of consideration exchanged
In addition to these two basic elements, the parties to the contract must have the mental capacity to form a contract and also the subject matter of the contract must be legal.
Does a Contract Have to Be in Writing?
A contract can be oral or written, however, there are some contracts that must be in writing to be enforceable. The Statute of Frauds provides that the following contracts must be in writing in order to be enforceable:
- Contracts for marriage
- Contracts that cannot be performed within one year
- Contracts for the transfer of an interest in land
- Suretyship contracts
- Contracts for the sale of goods totaling $500 or more
What Is a Breach of Contract?
A contract is a mutual agreement between two parties wherein each party has an obligation to the other. In the event the obligation is not fulfilled, not performed in accordance to the contract, or the obligation is not fulfilled on time, one may argue that there has been a breach of the contract.
What Are Breach of Contract Remedies?
There are a number of possible remedies for a breach of contract. These remedies include:
1. Damages: Damages are monetary damages meant to compensate the non-breaching party for the breach.
- Expectation Damages: Expectation damages seek to put the non-breaching party in the position had the contract been performed. They are often called "benefit of the bargain" damages. In expectation damages, the measure of damages is the difference between what was given and what was promised, along with consequential and incidental expenses incurred as a result of the breach.
- Incidental Damages: Incidental damages are usually argued with expectation damages. These damages are the type of damages that are reasonably associated with, or stem from the original breach. An example of incidental damages would be the cost associated with stopping delivery of goods after a buyer’s breach of contract.
- Consequential Damages: Consequential damages go beyond the contract itself. These types of damages must be proven. Examples of consequential damages include loss of profits or revenue.
- Nominal Damages: Nominal damages are minimal damages awarded to an individual in an action where the person has not suffered any substantial injury or loss, but the court recognizes that harm has occurred.
- Liquidated Damages: When damages would be difficult to quantify, some contracts provide for liquidated damages. The amount must be reasonable in light of the contract and cannot be seen as punitive.
- Punitive Damages: Punitive damages are damages meant to punish a guilty party in order to prevent that party from engaging in similar conduct in the future. Punitive damages are not awarded in contract matters.
2. Equitable Remedies: Equitable remedies are remedies imposed by the court when monetary damages are not available. Typically equitable remedies are awarded when money damages would not adequately cure the non-breaching party due to the breach.
- Specific Performance: Specific performance is a court order requiring a party to act or not act. In contract, specific performance will typically require that person to perform their part of the contract.
- Rescission: Rescission occurs when a former contract is rescinded, or cancelled, and a new one may be formed to meet the parties’ needs. Typically, rescission is given when both parties agree to cancel the contract or if the contract was create through fraud.
- Reformation: Reformation permits two parties to modify a contract to more accurately reflect the intention of the parties. This may occur if one or both parties were mistaken about a material term to the contract.
Defenses against Breach Of a Contract
Before there can be a breach of a contract, a valid contract must be found. There are many defenses that can be raised against the formation of a contract. In the event any of these defenses are raised and proven, the contract may be set aside and deemed void, voidable, or unenforceable. These defenses include:
- Misrepresentation: Misrepresentation is found when a false statement of fact is made by one party to another party and has the effect of inducing that party into the contract. There are two different types of misrepresentation - fraud in the factum and fraud in the inducement. Fraud in the factum focuses on whether the harmed party knew they were creating a contract. Fraud in the inducement focuses on misrepresentation focuses on misrepresentation of attempting to get the harmed party to enter the contract in the first place.
- Mistake: A mistake in contract is an incorrect understanding by one or more parties and may be used as grounds to void the contract.
- Duress and Undue Influence: Duress occurs where one threatens physical harm to induce them to enter into the contract. Undue influence occurs where one party to the contract takes advantage of the harmed party to the contract. This typically occurs in situations where one party is in a position of power over the other.
- Incapacity: Incapacity occurs where one, based on certain factors is unable to have a contract enforced against them. An example of incapacity is a minor as a party to a contract. Additionally, an elderly person who is not of sound mind will likely be deemed to lack the necessary capacity to contract.
- Illegal Purpose: A contract for an illegal purpose is unenforceable by law and void. The courts will not uphold a contract for an illegal purpose. Examples of this would be a contract for prostitution (in a state where prostitution is not legal) and hired-to-kill contract.
Do I Need a Lawyer for My Breach of Contract Lawsuit?
Contract issues can be very complex. If you have been harmed by a contract breach or are being sued for breach of contract, an experienced business attorney can help you navigate the difficult road ahead.
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Last Modified: 12-28-2015 03:58 PM PST
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