Contracts are a favorite tool of business people everywhere, as they lend assurance and definition to transactions. But what happens when someone doesn’t do what they said they would in a contract? In the legal world, this is called a “breach,” and there are a number of remedies for this situation.
Remedies in Law
When lawyers talk about “remedies in law,” they are talking about money damages. For breach of contract cases, there are several different types of monetary remedies:
Compensatory damages: This is the most common breach of contract remedy. When compensatory damages are awarded, a court orders the person that breached the contract to pay the other person enough money to get what they were promised in the contract elsewhere.
For example, suppose you hire and pay someone to clean your house for $100, but he is unable to do it. You search for a new cleaning service, and the cheapest one you find will clean your house for $150. If this cost is found to be reasonable, your first cleaner would have to pay you $150 in compensatory damages, allowing you to get your house professionally cleaned as the contract intended.
Restitution: When a court orders restitution, they tell the person that breached the contract to pay the other person back. In the example above, the court would order the first cleaner to pay you back $100, since that’s what you paid him to clean your house.
Punitive damages: This is a sum of money intended to punish the breaching party, and is usually reserved for cases in which something morally reprehensible happened, such as a manufacturer deliberately selling a retailer unsafe or substandard goods.
Nominal damages: A court awards nominal damages when there has been a breach of contract but no party to the contract suffered any harm.
Liquidated damages: These are damages that the parties agree to pay in the event a contract is breached.
Quantum Meruit: A court can award one party payment for what they deserve for any work that she performed before the other party breached the contract. For example, if the cleaner in the example above had cleaned half the house, and then you decided you didn’t want him to finish, he can demand $50 as quantum meruit. Translated from Latin, the term means “as much as he deserved.”
Remedies in Equity
A remedy in equity is when the court orders someone do something. This can also be called “injunctive relief.” In breach of contract cases, this can look like any of the following:
Cancellation: The court cancels the contract and decides that the parties are no longer bound by it.
Specific Performance: This is when the court forces the breaching party to perform the service or deliver the goods that they promised in the contract. This is typically reserved for cases when the goods or services are unique.
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Breach of contract
|Part of the common law series|
|Defenses against formation|
|Excuses for non-performance|
|Rights of third parties|
|Breach of contract|
|Related areas of law|
|Other common law areas|
Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party’s performance. Breach occurs when a party to a contract fails to fulfill its obligation(s), whether partially or wholly, as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform its obligation under the contract. Where there is breach of contract, the resulting damages have to be paid to the aggrieved party by the party breaching the contract.
If a contract is rescinded, parties are legally allowed to undo the work unless doing so would directly charge the other party at that exact time.
It is important to bear in mind that contract law is not the same from country to country. Each country has its own independent, free standing law of contract. Therefore, it makes sense to examine the laws of the country to which the contract is governed before deciding how the law of contract (of that country) applies to any particular contractual relationship.