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What options do I have after another party breached our contract?

On Behalf of | Jun 23, 2022 | Business Contracts |

If you’re certain the other party is in breach, or if they have made clear they plan to breach the contract, you have several options. The first one is to try to work something out on your own. There is often an accommodation that can be made by one side or the other that would allow the contract to move forward. Be sure to get any changes in writing.

Assuming you’re not able to work something out, you can seek a remedy such as payment of damages or court order that they complete the contract. Here’s what you can expect:

Most of the time, the remedy for a breach of contract is compensatory damages. This typically involves payment for all your reasonable losses due to the breach and also payment of any reasonable profits you can prove you would have received if the contract had not been breached.

Depending on the wording of your contract, you may receive liquidated damages instead. This is meant to make the process of determining your damages easier. At the time the contract is negotiated, both sides agree on a reasonable amount in damages that should be paid upon breach.

In certain situations, you might receive restitution, which is simply reimbursement for payments you have already made toward the contract. Or, a court can award “quantum meruit” damages, in which it determines what you deserve. In some limited situations, a court could order nominal damages which acknowledge the wrongfulness of the breach in situations where few actual damages have accrued.

There are some situations where you might be eligible for punitive damages, which are meant to punish wrongdoing as opposed to compensate the non-breaching party. There are some statutes that specify that punitive damages are available. In other cases, a court or arbitrator might order punitive damages because something morally reprehensible has happened.

If you prevail in court, the court sometimes has the power to order the breaching party to fulfill the contract. This is called specific performance. Courts can also cancel the contract altogether and order restitution, quantum meruit damages or compensatory damages.

You can seek damages through negotiation, mediation, arbitration or court litigation

Working with your attorney, you should settle on which of these dispute resolution methods is most appealing to you or convenient to you. Each process has pros and cons. It’s important to understand that you can only get specific performance of the contract through a court hearing.

In general, your lawyer will run the numbers and come up with a proposal for the other party to consider. You are allowed to seek the maximum damages available, as long as those damages are reasonable and foreseeable.

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