A guide to remedies for breach of contract
When one party to a contract fails to fulfil their obligations under it, it’s classed as a breach of contract. Where the other party suffers a loss because of this, they are entitled to ask for a remedy.
Before taking action against breach of contract, it is important to ensure that you fully understand the legal position that you find yourself in. If the contract has not ended, you could potentially end up breaching the contract yourself if you do not proceed correctly. For more information about whether a contract has been breached and what type of breach has occurred, find our article on Breach on Contract Explained and the 5 Questions You Need to Ask.
Breach of a contract
A contract may be breached in a number of ways, including one party failing to carry out the work they have agreed to do, where the work done is defective, failing to pay, failing to deliver goods or services or being late in performing their obligations under the contract.
The contract does not have to be in writing, but can be verbal or have implied terms within it. This can cause misunderstandings and disputes if the parties to the contract have slightly different opinions on what has been agreed. For this reason, it is always advisable to try and put all contractual agreements in writing with as much detail as possible.
Three remedies for breach of contract
Before bringing a claim for breach of contract, you will have to prove that there was a contract in existence. Provided you can do that, you must then show that the other party failed to perform their part of the agreement satisfactorily and that you suffered a loss as a result.
Where you can prove this, you will be entitled to one of three available remedies.
Where a breach is so serious that the contract will not be performed, the court may class it as a repudiatory breach and hold that the contract is at an end. Alternatively, the contact may specify certain actions or failures to act which will be held to constitute a repudiation of the contract.
This could arise where one party does not or cannot perform its contractual obligations. Where the innocent party has suffered loss because of the breach, damages may be awarded.
It is important not to simply assume the contract is at an end and fail to carry out your own duties, however, as this could result in you being liable for breach of the contract yourself.
If you believe that a repudiatory breach has taken place, you should seek legal advice to ensure that you protect your own interests when seeking redress.
The payment of damages is intended to put the innocent party into the position, they would have been in, had the contract been satisfactorily performed.
The court has the power to award two types of damages. Special damages are awarded for a loss that is quantifiable, such as the loss of anticipated profits. The second type is general damages, which are not quantifiable and are awarded for other losses, such as loss of amenity or inconvenience.
Some contracts, particularly those used in construction and manufacturing, will specify the amount to be paid in the event that a contract is breached. These are known as liquidated damages.
It should be noted that the innocent party is expected to mitigate losses so far as is reasonable. They must also be able to show that the loss was directly caused by the breach. For more information on remedies and how to resolve matters of brach of contract, read our blog here.
Specific performance and injunction
On occasion, it may be possible to ask the court to make an order for specific performance, instructing the other party to carry out their contractual obligations as set out in the agreement, although in reality this remedy is not used frequently. By the time a dispute reaches court, the parties would usually have difficulty in resuming a relationship.
An injunction can also be sought. This can be either a mandatory injunction, instructing one party to take a certain action, or a prohibitory injunction stopping specified steps from being taken. The injunction may be on an interim or final basis.
Specific performance and injunctive relief are often sought alongside damages for loss arising from breach of a contract.
Resolving a breach of contract dispute
It is usually advisable to try and resolve a dispute arising out of a breach of contract without recourse to the court. This is almost always a more cost-effective and time-efficient method of dealing with a disagreement. It can also minimise the animosity between the parties.
At Lincoln & Rowe, we can negotiate on your behalf to try and agree a solution with the other side or their solicitors. In the event that an agreement is reached, we would ensure that it is put clearly in writing so that both parties know exactly what is expected of them.
We can also assist you in preparing your case for mediation, should you choose this route. In the event that you are unable to reach a satisfactory agreement with the other side and your case proceeds to court, our expert litigators will provide you with robust representation.
Avoiding contract disputes
Dealing with a contract dispute where you have been let down can be time-consuming, frustrating and expensive. It will be disruptive for your business and has the potential to cause far-reaching problems. The best way to avoid a dispute arising is to ensure that all of your contracts are well-drafted and that they cover all eventualities.
When an agreement is clear and unambiguous, there is far less scope for misunderstanding or disagreement. A contract can give details of how and when it is repudiated and can also include clauses dealing with dispute resolution.
By ensuring that everyone understands upfront what is expected of them and what will happen if they fail to meet their obligations, you stand a far stronger chance of having a successful transaction and dealing easily with any difficulties.
Get in touch with us
We have wide-ranging experience in litigation and corporate law, and were named as the ‘Commercial Disputes Specialists of the Year” in the Corporate Livewire Innovation & Excellence Awards 2020 as well as ‘Boutique Litigation Law Firm of the Year’ in both the 2019 and 2020 Global Awards by ACQ5.
If you would like to talk to one of our expert legal team about any queries you may have regarding breach of contract, remedies and damages, contact the author, Dipesh Dosani, or call the team today on 020 3968 6030 and we’ll be happy to help.
The above information is for general guidance on your rights and responsibilities and is not legal advice. If you need more details on your rights or legal advice about what action to take, please contact a legal advisor.