You have performed as required by the contract, but you have suffered harm because the other party has not performed. What financial remedies can you pursue? When one of your business contracts has been materially breached, there are several options for remedying the infringement. A hybrid of common and statutory laws in most states offers the injured party some form of redress. Remedies are divided into two general categories: (i) legal damages, which are monetary awards; and (ii) equitable remedies, which are typically granted when monetary relief is insufficient to cure the contractual breach. Monetary awards are intended to compensate the injured party for his loss and include: compensatory damages, punitive damages, liquidation damages and nominal damages. Equitable remedies, such as restitution or specific performance, may also be appropriate in certain circumstances.
Compensatory damages. As the most commonly awarded damages, compensatory damages are intended to reimburse the injured party for losses incurred from the defaulting party’s actions. This type of monetary award allows the aggrieved party to obtain what was originally promised in the contract. Compensatory damages include both expectation and consequential damages. The former covers what the party sought to acquire from the agreement (determined according to the terms of the contract or fair market value) and the latter addresses any incidental harm that foreseeably resulted from the breach of the contract outside the explicit contractual loss.
Punitive damages. Punitive damages are designed to penalize the defaulting party rather than compensate the injured party. These types of damages are rarely granted in breach of contract cases, with the exception of certain tort actions in which the defendant’s conduct is particularly objectionable.
Liquidation damages. During the negotiation of a contract, parties can agree on a reasonable amount to be awarded to an injured party in case of a default. Liquidation damages are often specified in the contract when parties may have difficulty foreseeing damages
Nominal damages. Nominal damages are granted when the plaintiff does not suffer a monetary loss but is determined to be the justified party in the action. As with punitive damages, nominal damages are seldom awarded in breach of contract cases, since such cases often result in some type of financial harm.
Restitution. As an equitable remedy, restitution does not entail collecting a monetary award. Rather, restitution is a means of ensuring that the defaulting party does not receive undue enrichment as a result of his or her actions.
Specific performance. This equitable remedy requires the defaulting party to perform the obligations of the contract, but is limited to certain situations generally involving a particularly unique result that is not readily compensable by monetary damages. Claims for specific performance may be seen in the context of a purchase of unique real estate.
Every business should understand the potential remedies available for breach of contract. Consulting with an attorney experienced in business disputes will help you determine your options when your business is facing litigation. Contact Shane Coons at 949-333-0900 or visit www.ShaneCoonsLaw.com to obtain the legal advice you need to resolve your contractual disputes.