When you’re in business, contracts are essential for establishing legal obligations, protecting interests and guaranteeing clarity and accountability in transactions and relationships. They serve as the bedrock for conducting business in a structured, predictable manner.
However, not all parties that you enter contracts with will uphold their end of the agreement, resulting in a breach of contract.
Remedies to breach of contract
When faced with a breach of contract, there are several remedies available to help mitigate damages and enforce the terms of the agreement:
- Specific performance: You may be able to seek a court order requiring the breaching party to deliver on their contractual obligations as outlined in the agreement. This remedy is typically pursued when the subject matter of the contract is unique or when financial damages would be inadequate to remedy the breach.
- Liquidated damages: Some contracts include provisions specifying the damages to be paid in case of a breach. These are referred to as liquidated damages clauses and are enforceable if they are considered estimates of the actual losses likely to be incurred as a result of the breach.
- Rescission: As the non-breaching party, you may also have the option to seek rescission of the contract, which involves canceling the agreement and restoring both parties to their pre-contractual positions. Rescission effectively wipes out the contract and releases both parties from their obligations, providing a clean break from the breached agreement.
- Compensatory damages: This remedy is aimed at compensating you for any financial losses incurred as a result of the breach. The goal is to put the non-breaching party in the position they would have been in had the contract been performed as agreed.
Dealing with a breach of contract can be daunting, and it is important to consider seeking legal guidance to help determine the most appropriate course of action.
