Remedies in Contract Law – A Basic Guide

If the terms of a contract are breached by one party, the other may suffer a loss. Where this occurs, there are various remedies which the party suffering from the other’s breach can use.

A breach of contract is caused by a failure to perform a duty specified by the contract. The contract’s terms can be divided into conditions and warranties. These can be expressly stated or implied within the contract. A condition is something fundamental to the contract. Breaching a condition will allow the other party to the contract to terminate it by ‘repudiating’ it and to claim damages. Breaching a warranty will only allow a damages claim and does not bring the contract to an end.

Monetary damages for breach of contract are intended to be compensatory –
i.e. to put the injured party in the position he reasonably expected to be in when the contract was created. Sometimes, the sum of damages will be written into the contract by the parties to it. This is termed liquidated damages. However, where the sum specified as liquidated damages is excessive, so that it is a deterrent rather than a genuine pre-estimate of loss, the courts may not uphold such a clause. Unliquidated damages are those damages decided after the breach occurs, either by the parties themselves or by the courts.

To determine the level of damages payable, consideration is given to how damages might arise both out of the contract itself and from the parties’ contemplation when they entered into the contract. Compensation can only be made for losses which are foreseeable at the time the contract was created.

The other remedy used in contract law is for the courts to order ‘specific performance’, which requires the party committing the breach to fulfil its part of the contract. This may involve an injunction to stop a breach of contract. It is not used where it is judged that damages would be an adequate remedy.