Contracts are at the heart of all business relationships. They are legal agreements that outline the rights and obligations of all parties.
For the most part, contracts are honored, but that’s not always the case. Breaches of business contracts do occur, and they can be costly, stressful and time-consuming. How can contractual breaches be remedied in law?
Financial damages
The most common remedy for breach of contract is monetary damages. These are intended to cover the financial losses caused by the breach. Monetary damages can be broken down into the following categories:
- Compensatory damages: Cover actual losses to put the injured party in the position they would have been in if the contract had been fulfilled.
- Consequential damages: These include indirect losses, such as lost profits that result from the breach.
- Liquidated damages: Predetermined damages stated in the contract.
The types of damages available depend on the contractual terms and the circumstances of the breach.
Specific Performance
In some cases, monetary damages may not suffice. A court can order specific performance, requiring the breaching party to fulfill their contractual duties. This remedy is more common in contracts involving unique goods or real estate, where financial compensation would not be a suitable solution.
Specific performance is less common than monetary damages because the business relationship is often irreparable after a significant breach.
Rescission
In some cases, the non-breaching party may simply want the contract canceled. This is called rescission. After rescission, restitution may also be available. This means the breaching party must return any benefits they received under the agreement.
If your business has been impacted by a breach of contract, it’s important to act quickly. The first step is to seek some legal guidance.