Breach of Contract Remedies for Your Business
When one party does not uphold their end of an agreement, it can be costly to the other party. The non-breaching party can suffer loss of customers, damaged business relationships, financial loss, and tarnished reputations. The financial impact of a breach of contract can be devastating to a small Idaho business. If you are facing a breach of contract, there are various available contract law remedies. Below, we discuss ways to resolve your breach of contract matter and available remedies for a breach of contract.
What Is a Breach of Contract?
A breach of contract occurs when one party to an agreement fails to meet their obligations. There are a few types of breaches, including:
- Material breach—a significant breach that impacts the contract’s execution and occurs when a party fails to perform a vital aspect of the contract;
- Non-material (minor) breach—a breach that may not impact the contract’s fulfillment and involves a minor violation of a contract term;
- Anticipatory breach—a breach that takes place when a party communicates to the other party that they do not intend to fulfill the contract before the performance date; and
- Actual breach—direct failure to perform agreed-upon contractual obligations by not performing or performing inadequately or late.
The severity of the breach can impact the remedies available to the non-breaching party.
Potential Solutions for Breach of Contract
If confronted with a breach of contract, you can pursue alternative dispute resolution processes or traditional litigation.
Alternative Dispute Resolution
Before taking the breaching party straight to court, other methods of resolving the issue may be fruitful. More collaborative conflict resolution methods may save you time and money. They may also maintain or improve your relationship with the other party. Some options for resolving breach of contract matters out of court are:
- Negotiation—the parties (and their attorneys) negotiate terms to resolve the contract issue;
- Mediation—a neutral third-party mediator facilitates communication between the parties to come to an agreed-upon solution; and
- Arbitration—a neutral third-party arbitrator hears both sides and decides how best to resolve the dispute.
The dispute resolution option you choose depends on the nature and severity of the breach, the parties’ relationship, and the potential for a mutually beneficial outcome.
Litigation
In some circumstances, alternative dispute resolution will fail or be inappropriate due to the nature or severity of the breach. Traditional litigation remains an option to pursue remedies for a breach of contract. An experienced breach of contract attorney can help you gather evidence, file your claim, prepare a strategy, and advocate for your interests in court.
Legal Remedies for Breach of Contract
Several breach of contract remedies are available to a non-breaching party, depending on the facts and circumstances of the breach. Courts can award damages, impose equitable remedies, or grant a combination.
Monetary Damages
Monetary damages for breach of contract are the most common type of contract law remedies.
Compensatory damages
Compensatory damages are the most awarded remedy in breach of contract cases. They aim to compensate the non-breaching party for financial losses incurred due to the breach of contract. The goal is to make the non-breaching party whole again or to put them in the position they would have been in without the breach. Compensatory damages are calculated based on the actual losses the non-breaching party sustained due to the breach.
Liquidated damages
Liquidated damages are monetary damages expressly provided for in the contract in case of a breach. They provide an agreed-upon level of compensation to the non-breaching party. They can be a fixed amount, or the parties can set out a formula to calculate the amount of liquidated damages.
Punitive damages
Punitive damages may be appropriate when a breaching party has engaged in an extreme deviation from reasonable standards of conduct. These damages serve a public policy purpose to deter egregious behavior by reducing the economic benefit of engaging in that behavior. Punitive damages are rarely allowed. They are for situations where a breaching party acts with malice, oppression, fraud, or gross negligence. They are not appropriate for most breach of contract matters.
Equitable Remedies
Some remedies are more equitable in nature. There are several types of equitable legal remedies for breach of contract.
Specific performance
In specific performance, the court can order the breaching party to perform their obligations under the contract. Courts typically impose this equitable remedy if compensatory damages are inadequate to compensate the non-breaching party or the contract has a unique subject matter.
Injunction
An injunction is a court order requiring the breaching party to take a specific action or stop from taking an action. Courts usually use injunctions when one party has ongoing obligations under the contract, and the other party may suffer irreparable harm if those obligations are not met.
Reformation
Sometimes, the court may allow the parties to re-write parts of the contract to reflect their original intentions.
Rescission
Rescission allows the non-breaching party to cancel the contract and return to their position before it was formed. It is typically used if there is a material breach.
Let Smith + Malek Be Your Trusted Idaho Breach of Contract Attorneys
If you are new to managing contracts or an experienced business owner, breach of contract claims can be overwhelming and complex to navigate. Let Smith + Malek’s team of experienced attorneys be your trusted Idaho breach of contract advisors. Our attorneys will review the facts of your case, develop innovative strategies, determine the most appropriate resolution method, and advocate to protect your interests. Smith + Malek has helped hundreds of clients with breach of contract matters since 2015. As a small firm, we offer bespoke legal solutions for our clients. Contact us today to learn how Smith + Malek can help resolve your breach of contract issue.