Cecily Zamora
A remedy in contract law is a court-ordered resolution or compensation awarded to the non-breaching party in the event of a breach of contract. The goal of a remedy is to restore the non-breaching party, also known as the injured party, to the position they would have been in had the contract been performed as agreed. Remedies for breach of contract can generally be divided into two categories: legal and equitable. Legal remedies allow the non-breaching party to recover monetary damages, while equitable remedies, also known as injunctive relief, require the breaching party to take or refrain from taking a specific action.
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Monetary compensation
There are several types of monetary compensation remedies, including compensatory damages, special damages, and punitive damages. Compensatory damages, also known as "actual damages", are the most common type of damages awarded for breaches of contract. They cover the loss directly incurred by the breach of contract and are intended to make good or replace the loss caused by the breach. The calculation of compensatory damages depends on the type of contract that was breached and the type of loss that was incurred. For example, in contracts for the sale of goods, the damages are measured by the difference between the contract price and the market price when the seller provides the goods or when the buyer learns of the breach.
Special damages, also known as "consequential damages", cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable. These losses are not direct and immediate but must be caused by the breach. To obtain special damages, the non-breaching party must prove that the breaching party was aware of the special circumstances at the time the contract was made.
Punitive damages, also known as "exemplary damages", are awarded in addition to compensatory damages to punish or make an example of the wrongdoing of a party that acted willfully, maliciously, or fraudulently. However, punitive damages are rarely awarded in breach of contract cases and are more often used in tort cases where personal harm was a result of the wrongdoing.
In some cases, monetary compensation may be favoured over specific performance as a remedy for breach of contract. Specific performance involves a court ordering a party to do something, such as fulfilling the terms of the contract. Monetary damages are typically preferred, but specific performance may be available when monetary damages won't adequately compensate the non-breaching party. For example, specific performance may be appropriate when the contract involves something unique that cannot be easily replaced.
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Injunctions
The most common type of injunction is where employees leave and set up in competition, in breach of restrictive covenants in their contracts. In these cases, an injunction can prevent them from operating for a period of time or require them to deliver confidential information that they took from their former employer. Injunctions are also sought when intellectual property rights are being breached and protection is required.
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Rescission
Courts may decline to rescind a contract if one party has affirmed the contract by their actions, or if a third party has acquired rights under the contract. Additionally, because rescission is meant to be imposed mutually on both sides of the contract, the party seeking rescission typically must offer to return all benefits received under the contract.
Certain contractual agreements have rescission periods written into them, sometimes by law. This gives consumers a certain amount of time, often days or weeks, to change their minds without penalty.
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Liquidated damages
When negotiating a contract, it is essential to ensure that contractual milestones, triggering events, and all aspects of the liquidated damages provision are explicit and precise to facilitate enforcement and reduce the likelihood of disputes. Courts generally uphold liquidated damages clauses, but they may disregard them if the amount is significantly disproportionate to the actual harm suffered by the plaintiff. Therefore, it is crucial for parties to make the most reasonable assessment of liquidated damages at the time the contract is signed.
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Nominal damages
In contract law, nominal damages are awarded when one party breaches a term of the agreement, but the innocent party has not suffered any harm or loss that can be calculated. For example, a plaintiff may sue a defendant for failing to provide insurance that was promised in a contract. If the plaintiff made alternative arrangements to guarantee their insurance coverage, the court may rule in their favour but award only nominal damages, as the plaintiff suffered no losses due to the defendant's actions.
While receiving nominal damages may not provide financial compensation, it does give the plaintiff the benefit of a ruling in their favour, which can be a moral victory and may pave the way for further legal action. Nominal damages also serve to acknowledge that a breach of contract occurred, even if there were no economic consequences, which is particularly important in constitutional law cases.
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Frequently asked questions
A remedy is a court-ordered resolution or compensation for a breach of contract. The goal is to place the non-breaching party (the "injured party") in the position they would have been in had the contract been performed as agreed.
Remedies for breach of contract can be divided into two categories: legal and equitable. Legal remedies allow the non-breaching party to recover monetary damages, also known as compensatory damages. Equitable remedies, or injunctive relief, require a party to take or refrain from taking a specific action.
Compensatory damages are the most common remedy in breach of contract cases. They are intended to put the non-breaching party in the position they would have been in if the contract had been performed as agreed. Compensatory damages can be divided into expectation damages and consequential damages.
An injunction is a court order requiring a party to take or refrain from taking a specific action. It is usually used when one party has an ongoing obligation under the contract, and the other party is at risk of suffering irreparable harm if the obligations are not met.
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