Contracts enable businesses to regulate relationships and transactions. However, when one or more parties fail to uphold the terms of a contract, disputes can arise.
Contract breaches can cause substantial problems for businesses and entrepreneurs. Fortunately, there are legal remedies that help address these situations.
Seeking damages
An organization or individual can pursue compensation to remedy a breach of contract. Courts can award compensatory damages for contract breaches that cause expenses, hardship and financial losses. If no harm occurred beyond the contract breach, the court can order nominal damages. The term liquidated damages refers to any payments the parties involved in the contract agree to pay in the event of a breach.
In some cases, one party in a contract dispute may have to pay the other restitution to correct the contract breach. Although less common, courts can order punitive damages to penalize people and businesses that act in ethically reprehensible ways. Punitive damages also discourage immoral or unsafe behavior in the future.
Remedies in equity
Courts can order parties to undertake specific actions. These rulings are known as remedies in equity or injunctive relief. For example, a court can engage in the cancellation of a contract and declare that all parties involved are no longer bound by its terms. In cases involving unique services or goods, courts sometimes order specific performance. This means the breaching party must produce and deliver the goods promised in the initial contract or carry out the services they promised to perform.
When disputes over contracts occur, courts can award damages and mandate certain behaviors to correct the breach.