5 Remedies for a Breach of Contract: Understanding Your Options

February 29, 2024 • Contract Management • 5 minutes

Table of contents

  1. What are remedies for a breach of contract?
  2. Types of legal remedies for breach of contract
  3. Choosing the right remedy for a breach of contract
  4. Legal advice and contract disputes
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Understanding remedies for a breach of contract is essential for navigating contract disputes effectively. When a party fails to perform as agreed, it’s crucial to know the legal remedies available to you, and how to negotiate for them.

Here, we’ll guide you through the typical remedies for a breach, including compensatory damages, liquidated damages, and more. By understanding these remedies, you can protect your interests — and respond appropriately if a breach of contract happens to you.

What are remedies for a breach of contract?

Remedies for a breach of contract are legal solutions available when a party fails to perform as agreed. A breach of contract occurs when any term of the contract is broken, whether it’s a missed deadline, incomplete work, or failure to pay. The type of remedy depends on the specific circumstances and the terms of the contract.

For example, if a supplier doesn’t deliver goods on time, or if a contractor fails to complete a project as per the agreement, that’s a breach. The terms of the contract play a crucial role in determining what constitutes a breach, however. They outline the expectations and obligations of each party — and when these are not met, a breach has taken place.

Types of legal remedies for breach of contract

You may be able to pursue a wide variety of different legal remedies, depending on the type of breach of contract you’ve experienced, and how you want to handle it. Here are five of the most common.

1. Compensatory damages

Compensatory damages are a popular breach-of-contract remedy, aiming to cover the loss the injured party suffered due to the breach. The purpose of these damages is to restore the injured party to the position they would have been in if the breach hadn’t occurred. For instance, if a vendor fails to deliver goods, compensatory damages would be the cost to the buyer of obtaining the goods elsewhere.

2. Liquidated damages

Liquidated damages are predetermined monetary damages agreed upon when parties draft the contract. This type of remedy is used when it’s difficult to estimate the actual damage at the contract’s formation. Liquidated damages provide a clear, agreed-upon sum that a party will pay if they breach the contract, offering a sense of security and predictability.

3. Specific performance

Specific performance is a contract remedy where the court orders the breaching party to fulfill their part of the contract, rather than paying damages. This remedy is typically used when monetary damages are inadequate, such as in cases involving unique goods or real estate.

4. Punitive damages

Punitive damages are awarded in cases where the party breached the contract in a significantly harmful way — for example, if a construction company used toxic materials that made tenants sick. The goal here is not just to compensate the injured party, but to punish the wrongdoer and deter similar conduct in the future. These are less common in contract law and are usually reserved for cases involving malicious or fraudulent behavior.

5. Nominal damages

Nominal damages are a symbolic remedy awarded when a breach of contract occurred, but there was no substantial loss or injury. This remedy acknowledges that a breach happened, upholding the injured party’s rights under the contract, even when they haven’t suffered significant damages.

Choosing the right remedy for a breach of contract

When selecting an appropriate remedy for a breach of contract, consider the following factors:

  • Nature of the breach: Understand if it’s an anticipatory breach of contract, where a party indicates they won’t fulfill their obligations before the due date, or a material breach of contract, which is a significant failure to perform as per the contract terms. Remedies may vary based on the breach type.
  • Specific circumstances: Every breach is unique. Consider the specific context, such as the impact of the breach on your business, the actions of the other party, and potential long-term effects.
  • Contract terms: Review the contract thoroughly. Many contracts specify preferred remedies for breaches, which can guide your choice.
  • Financial implications: Assess the financial impact of the breach. If the breach resulted in significant financial loss, compensatory damages might be appropriate.
  • Desired outcome: Determine what you want to achieve with the remedy. If you wish to continue the business relationship, specific performance might be suitable. For egregious breaches, punitive damages could be considered.
  • Feasibility: Consider the feasibility of the remedy. Specific performance may not be practical in all cases, while monetary damages might be more straightforward to implement.

Understanding these factors will help you choose a remedy that aligns with your interests and the breach’s nature.

Legal advice and contract disputes

In a breach of contract situation, the role of legal counsel is pivotal. Legal experts provide crucial guidance, helping you navigate the complexities of contract law. They can help:

  • Assess the situation: Lawyers analyze the contract and the circumstances surrounding the breach. They help determine if a breach of contract occurred and the severity of the breach.
  • Advise on remedies: Based on their assessment, legal counsel can recommend the most appropriate remedy. They consider the specific circumstances, the nature of the breach, and your best interests.
  • Negotiate and communicate: Attorneys often negotiate with the other party, seeking a resolution that avoids lengthy litigation. They communicate on your behalf, ensuring your position is strongly represented.
  • Prepare for litigation: If negotiation fails, legal experts prepare for litigation, representing you in court and arguing your case for the chosen remedy.

In all these ways, a legal counsel serves as an expert who understands contract law details, and can effectively advocate for your rights and interests.

Being aware of remedies for a breach of contract is essential for protecting your interests and resolving disputes effectively. By familiarizing yourself with legal remedies such as compensatory damages, specific performance, and punitive damages, you can respond confidently if a breach occurs — and ultimately stand a better chance of achieving a favorable outcome.

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