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Remedies for breach of contract

On Behalf of | Jan 31, 2020 | Commercial Real Estate, Corporate And Tax Law |

Florida businesses work with contracts every day, and most of the time they work so smoothly that business owners and managers hardly have to think about them. The importance of a contract may not even be apparent until something goes wrong.

Some types of contracts, such as contracts for the sale or purchase of real estate, must be in writing, but many types of contracts can be verbal. The important point of either verbal or written contracts is that the parties agreed to their obligations.

A breach of contract occurs when one of the parties fails to carry through with their obligations under the contract. If the contract is valid, these obligations are legally enforceable, and so the other party can go to court to ask for a resolution to the dispute. The court can then find one party in breach and impose a remedy.

The most common remedies for breach of contract are: compensation of damages; specific performance; and restitution.

Restitution means, essentially, repayment. If Acme paid Bendix for work under a contract, but Bendix never performed the work, then a court may determine that Bendix breached the contract and the appropriate remedy is for Bendix to pay back the money that it received from Acme.

Alternatively, the court may decide that, under the circumstances of the case, the appropriate remedy is specific performance. This means it can legally require Bendix to perform the work it agreed to do under the contract. This type of remedy is most common in situations where the subject matter of the contract is unique, and therefore payment of restitution or damages is insufficient.

Payment of damages is the most common remedy for breach of contract, and in some ways the most complex. It comes in several categories. One of the most important is compensatory damages. These are meant to compensate the non-breaching party for the losses they suffered due to the breach, and they can require extensive calculation.

For instance, Acme may have spent a lot of money in preparation for a new product line it hoped to launch, and when Bendix breached the contract, Acme lost all that money. Compensation for this loss would be part of the compensatory damages package, but Acme’s damages may go beyond these. For instance, Acme may have given up some business opportunities in anticipation that this new product line would take up all its workers’ time and energy. To recover fair compensation, it needs to calculate those losses and add them into the compensatory damages total.

Because these calculations can be so difficult, parties often agree to liquidated damages under the terms of the contract itself. In the event of a breach, the breaching party can be ordered to pay the previously agreed upon liquidated damages as part of the remedy.



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