One of the most frustrating aspects of running a business is when you depend on someone to do something and they fail to deliver. Whether it’s a supply contract for merchandise or a service contract, if the other party breaches, it can cause considerable damage to your company in terms of time and money required to compensate for the breach. When this happens to you, what are your options? What kinds of legal remedies can you seek?
If you bring a lawsuit against the breaching party, you can seek compensatory damages. This is a restitution for the money that their breach cost your company. The purpose of compensatory damages is not to punish the breaching party, but rather, to put your business in the same position it would be in if the breach had not occurred – or as close to it as is possible.
Punitive damages are extra damages that the court can tack onto compensatory damages in order to punish the breaching party. However, these are very rare, and only occur under extreme circumstances.
Sometimes, no amount of money damages can make up for the breach. In these cases, the court might order specific performance – which is where they force the breaching party to perform their side of the original contract.
Courts practically never order specific performance for service contracts, since it would amount to forcing someone to perform labor against their will. Instead, specific performance most often appears when a seller backs out of a contract to sell a unique or irreplaceable item – such as a specific house or tract of land – which money damages would not adequately compensate the would-be buyer for.
Finally, if the court decides that it is in the interest of justice, they may order restitution. This is when they order the breaching party to pay back to you any money or other goods that you tendered to them as your side of the bargain.
Dealing with a breach of contract often comes with a considerable amount of stress and headaches. Knowing what your legal remedies are likely to be can help you to plan how to move forward and seek the compensation that you deserve.