What Are Your Options When Another Party Fails to Perform?
If you own or operate a business, contracts are your lifeblood, a key to the success of your enterprise. Unfortunately, contracts are breached on a fairly regular basis, for a variety of reasons. What are your options when a vendor, customer or other business partner fails to live up to the terms of an agreement?
The Common Remedies for Breach of a Business Agreement
There are a number of remedies that may be available to you, based on the facts and circumstances of the contract and breach:
- Damages—Damages are monetary compensation intended to cover your losses. In a breach of contract claim, there are typically three potential types of damages:
- Compensatory damages—As the term suggests, these damages are meant to “compensate” you for what you did not earn or receive because of the breach. They include:
- General or “expectation” damages—the amount you expected to receive/earn if the contract had not been breached
- Consequential damages—Any additional expenses or losses incurred because of the breach, such as cost of storage or disposal of goods
- Liquidated damages—You may choose to identify and include in the contract a specific payment or penalty in the event of a breach. Such payment or penalty is referred to as liquidated damages. For example, if delivery is due by a certain date, you may identify a daily penalty for late delivery—that would be a liquidated damages clause.
- Nominal damages—In situations where there has technically been a failure to perform, but no actual losses, the court may agree with the allegation of breach, but award a nominal amount, such as one dollar.
- Compensatory damages—As the term suggests, these damages are meant to “compensate” you for what you did not earn or receive because of the breach. They include:
- Specific performance—In very limited circumstances, a non-breaching party can ask the court to compel another party to perform according to the terms of the agreement. As a general rule, this remedy is only available when monetary damages would be insufficient, typically where the goods to be provided were unique (such as with the transfer of real property)
- Injunctive relief—An injunction functions much like specific performance, but prevents a party from breaching rather than ordering a party to perform
- Rescission—This remedy allows a party to be relieved of its contractual obligations under an agreement
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide comprehensive legal counsel to businesses and business owners. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
