Contract Negotiation:

Fixing a Breached Contract

In the event of a breached contract, the non-breaching party is entitled to certain types of relief, often called “remedies” under the law.  There are three main remedies for a breach of contract: damages, specific performance, and cancellation and restitution.

1. Damages are the most commonly-used remedy calls for payment in one form or another, made by the breaching party. There is a wide variety of damages, and in most cases, damages will be specific and correspond to the nature of breach.

Compensatory damages seek to put the non-breaching party in the position that they were prior to the breach.

Punitive damages are payments that the breaching party must make, extending beyond the point that would fully compensate the non-breaching party.  Punitive damages are assigned to punish a wrongful party for a specific, wrongful act; rarely are they applicable in the setting of business.

Nominal damages are token damages awarded when a breach occurred, but no actual monetary loss to the non-breaching party was proven.

Liquidated damages are specific damages that have been previously identified by the parties cited within the contract itself, should a breach occur. Liquidated damages are usually a reasonable estimate of actual damages that might result from a breach.

2.Specific performance refers to a court-ordered performance by the breaching party of the duties under the contract.  Specific performance may be used as a remedy for breach of contract if the subject matter is rare or unique such that damages would not satisfy the non breaching party appropriately.

3.Cancellation and Restitution may occur when the non-breaching party cancels the contract and sues for restitution, if they have given a benefit to the breaching party. Restitution in terms of a contract remedy places the non-breaching party where it was prior to the breach, and the cancellation of the contract renders it void and relieves all parties of obligations under the agreement.