Remedies for Breach of Contract

There are three main types of remedies for breach, as shown in Figure : damages, equitable relief, and quantum meruit. Each will be discussed below, with most of the attention focused on damages.

Figure : Remedies for Breach of Contract

Damages

Damages are the most common remedy for breach of contract. The goal of damages in contract law is to place the injured party in the same position as if the contract had been completed. The purpose is not to punish the offending party, as it is in tort law.

To qualify, damages must be for losses that are reasonably foreseeable. The test is whether from past dealings between the parties and from the knowledge of both of them at the time of the contract, the parties could reasonably foresee such a loss to result from breach. As well, damages will not be paid for losses that the plaintiff did not take reasonable steps to mitigate. Figure describes various types of damages awarded for breach of contract.

Figure: Types of Damages

In addition to the main form of compensatory damages (expectation damages), the courts may allow consequential damages other than lost profits if they flow from the breach and were reasonably foreseeable at the time the contract was made. As well, the courts may award general damages for harm that cannot be quantified with precision but which the courts believe are necessary to fairly compensate the injured party. General damages are often awarded to compensate for pain and suffering and sometimes mental anguish.

Equitable Remedies

Equitable remedies recognize that there are circumstances when monetary damages alone are inadequate. Such remedies are given at the court's discretion, and a plaintiff cannot claim such a right automatically on breach of contract. Impediments to obtaining an equitable remedy are lack of clean hands by the plaintiff (i.e., the conduct of the plaintiff has not been good), unreasonable delay by the plaintiff in bringing the action, adverse effect on an innocent third party, and lack of valuable consideration, as well as situations where the plaintiff could not have had the remedy awarded against him if he had been the defendant.

Specific performance requires one party to the contract to perform what he or she has agreed to do in the contract. It is commonly granted in contracts dealing with land or unique chattels. For example, the defendant may be required to proceed with the sale of the house to the plaintiff.

An injunction is a court order restraining the party from acting in a particular manner that will be granted when there is a negative covenant in the contract (a requirement that a party not do something). An injunction is generally not awarded against an employee when the effect would be to leave the employee no alternative but to work for the original employer or remain unemployed.

An interlocutory injunction is a temporary restraining order to limit the harm done pending resolution of a dispute at trial.

Rescission attempts to return the parties to the positions they were in before the contract was made. The plaintiff may feel she would be better off to have the contract set aside (to be returned to the position that would have existed had the contract never been entered into) than to sue for damages (to be placed in the position she would have been in had the contract been completed as planned). Rescission is generally used for durable goods that fail to perform as promised but have not been damaged. The plaintiff would usually just prefer to return the goods and get her money back. It may also be used in sales of land, where, for example, the vendor would prefer to just return the down payment and retain possession of the land.

Quantum Meruit

Quantum meruit is available as a remedy for breach of contract where there is no express agreement on how much is to be paid or where the work that has been done is less than that which had been contracted for, and there is no express agreement covering progress payments. The court will award what is reasonable under the circumstances.