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From Broken Promises To Fair Compensation: Understanding Legal Remedies for Contract Breaches

by | May 30, 2024

When you enter into a contract, there is an expectation that the other party will fulfill its obligations. When someone breaches a contract, it can be frustrating and make you uncertain about how to proceed.
We will go over some of your options if a party to a contract breaches it. Whether you are a business owner dealing with a vendor that didn’t deliver what it promised or an individual dealing with a breach in terms from a service provider, it’s important to educate yourself on your rights.
We will also examine some of the more common remedies for breaches, including monetary damages, specific performance, and rescission. By learning the basics of legal remedies for breach of contract, you can better recognize where to look for redress when a contract has been violated.

 

From Broken Promises To Fair Compensation: Understanding Legal Remedies for Contract Breaches

Types Of Contract Breaches

Before discussing the remedies available for breach of contract, we should first understand the types of contract breaches and how they will influence the remedies available. There are many types of contract breaches, but they basically fall into two categories: material breaches and minor breaches.
A material breach is a substantial violation of the terms of the contract. It involves a departure from the substance of the deal and a significant impairment of one contracting party’s ability to receive the promised benefits.
Here are just some of the many examples of material breaches:
  • Non-payment: failure to make a payment required under the contract, such as non-payment of rent, salary or invoices on time or at all.
  • Failure to render services: not rendering the contracted services or rendering them significantly different from what was required by the contract.
  • Non-performance: defaulting on important obligations spelled out in the contract, which means failing to perform, complete a piece of work (in the case of a contract for services), or deliver a finished piece of work or goods (in the case of a sale or conditional contract).
  • Repudiation: declaring your desire to withdraw from part or all of your contractual obligations, or expressing this intent through your actions.
  • Time-sensitive breach: failing to meet a critical deadline or schedule stipulated in the contract that in turn causes a substantial delay or disruption.
  • Substantial quality defects: providing goods or services that are seriously defective, unsatisfactory, or considerably different from the promise made in the contract.
  • Breach of confidentiality: unlawful disclosure or abuse of information communicated in confidence and within contract terms.
  • Unauthorized infringement of intellectual property: unlawful infringement of practice participants’ intellectual property rights, such as the unauthorized reproduction of copyright material.
  • Violation of non-compete clauses: engaging in the performance of the activity specified in a non-compete provision with the intent to injure, deceive or defraud a party to a non-compete agreement.
  • And more
Minor breaches of contract are less serious breaches, but nevertheless deviate from the letter of the contract. Because they break a non-core obligation of the contract, these incidents are still breaches of contract, even though they are not “substantial” breaches.
Here is a sample size of some minor contract breaches:
  • Late delivery: providing goods or services after the agreed-upon date but not significantly delayed.
  • Minor nonconformity: delivery of goods and services with minor defects or deviations from the agreed specifications, which are still correctable or reparable.
  • Incomplete documentation: not providing all the agreed-upon paperwork or documentation specified in the contract, such as missing a supporting document.
  • Trivial omissions: when insignificant details or terms are omitted from the contract that do not significantly affect the contract’s purpose or nature.
  • Technical errors: small computational mistakes or typos in the contract that do not affect meaning or substance.
  • Insufficient payment: paying an amount slightly less or slightly more than specified due to math miscalculation or an honest misunderstanding, even if it is not explicitly stated in the contract.
  • Deviations from non-essential terms: performing actions that deviate slightly but insignificantly from non-critical terms or conditions in a contract.
  • Incomplete cleanup: not thoroughly cleaning up a worksite once all agreed-upon services have been completed, but where the amount of remaining work is still relatively small and easy to deal with.
  • Minor scheduling conflicts: requesting alterations to non-essential dates or times outlined in the contract because of a reasonable and unexpected schedule conflict.
  • Minor non-performance: non-compliance with reporting requirements, for example, filing reports or updates with minor inaccuracies or late delivery, but of an overall nature not sufficient to materially affect the overall contractual relationship.
  • And more

Legal Solutions For Breach Of Contract

When a breach of contract occurs, there are several legal remedies available to the non-breaching party. The appropriate remedy will depend on the specific circumstances of the breach, the relationship of the parties involved, the specific contract provisions at issue, and the goals of the aggrieved party.
However, before exploring the various legal remedies available to you it is important to note that, following a breach, the non-breaching party has a duty to mitigate their losses even though they are not at fault. This means taking reasonable precautions to lessen the damage the breach causes. Failure to do so can limit the amount of compensation awarded in the event of a breach. This may involve seeking substitute performance from another party or taking other actions to reduce the financial impact of the breach.
With that out of the way, let’s explore some of the most common remedies available to you in the event of a material or non-material breach of contract.
1. Compensatory Damages: Compensatory damages are the most common form of remedy for breach of contract. They are designed to compensate the non-breaching party for any financial losses suffered as a result of the breach. The goal is to restore the injured party to the same financial position they were in prior to the breach, had it not occurred.
There are two types of compensatory damages: actual damages and consequential damages.
  • Actual damages refer to the direct financial losses that result from the breach, such as lost profits or additional expenses incurred.
  • Consequential damages are the indirect losses that are suffered as a result of the breach, but are not directly related to the breach itself, such as loss of reputation or loss of business opportunities
2. Specific Performance: In some cases, compensatory damages will not be an adequate remedy to cure the injury suffered as a result of the breach, in which case the remedy of specific performance allows the court to order the breaching party to perform the responsibilities she assumed under the contract.
It is traditionally utilized where the subject matter of the contract is unique to the parties or generally scarce, as in the case of one-of-a-kind goods (such as a painting or a specific parcel of land), or where monetary compensation is inadequate to make the non-breaching party whole.
3. Rescission And Restitution:
  • Rescission is a remedy that completely voids the contract, putting the parties in the same legal position as if they had never signed the contract. It is a powerful tool to cancel the contract and release both parties from their obligations under the contract. It will be available where there was a material breach or where there is an agreement from the parties to let each other off the hook and cancel the contract.
  • Restitution makes the non-breaching party whole by putting the party in the position they would have been in had the contract not been made in the first place. It requires that the breaching party return any resulting benefits or payments.
4. Liquidated Damages: If the contract specifies a liquidated damages clause, the parties may provide that a specified sum of money, or “liquidated damages,” will be payable as a result of the breach. Such a clause will be considered reasonable if it provides a genuine pre-estimate of the loss that would flow from a breach of contract at the time the contract was made. If the damages specified exceed the amount that the plaintiff is likely to actually suffer as a result of a breach, it would not be deemed reasonable or permissible.
5. Punitive Damages: Compensatory damages aim to reimburse the non-breaching party for its losses, whereas punitive damages aim to punish the breaching party and deter it and other parties from acting similarly in the future. Punitive damages are awarded over and above compensatory damages.Punitive damages are usually awarded only for breaches of contract involving fraud, malice or gross negligence. They are intended to send a message to the offender that such behavior is egregious and will not be tolerated.

 

Pitcoff Law: Your Go-To Firm For Contract Remedies

It is difficult to say what the best legal remedy for a breach of contract would be in a given situation. It depends on the type of breach, the nature of the contract, and the individual facts and goals of the situation. The best thing to do is consult with an experienced lawyer to discuss the specifics of your breach of contract situation. To discuss your situation in more detail, go over your options, and receive assistance in determining the best course of action for addressing a breach of contract and resolving the dispute, get in touch with our team at Pitcoff Law today.

 

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