Ensuring that a contract contains all the necessary legal elements is crucial for its enforceability. However, this alone does not prevent the other party from breaching the contract. Therefore, it is essential for businesses and individuals to understand the remedies available under the law in the event of a breach.
In this article, we will outline some of the primary remedies that may be available following a breach of contract.
Immediate Steps to Take Upon a Breach of Contract
A breach of contract occurs when one or more parties fail to fulfil their obligations under the agreement.
When a breach of contract occurs, it is important that the party seeking a remedy checks the terms of the contract for two reasons:
- Dispute Resolution Procedures: The contract may outline specific procedures that need to be followed in the event of a breach. For example, it might require the parties to attempt negotiation or mediation before commencing legal proceedings.
- Remedy Clauses: The contract might include clauses that detail the remedies available upon a breach. A common example is a liquidated damages clause, which specifies a fixed sum to be paid in the event of a breach. For instance, a contract might state that a contractor will owe the customer £100 for each day the project is delayed beyond the agreed completion date.
Unliquidated Damages
Damages are the primary remedy in English law for breach of contract. ‘Unliquidated damages’ refer to compensation that is not predetermined or specified by the contractual agreement and must either be agreed between the parties or, in the event that the parties fail to agree to a specific sum, assessed by a Court after a breach of contract has occurred.
The purpose of damages is to place the party who has suffered from the breach of contract in the position they would have been in had the contract been properly performed.
To claim damages, the claimant must demonstrate that the loss would have not occurred but for the breach. To determine the measure of loss and in turn the amount of monetary damages the claimant is entitled to claim, the claimant must compare the position it is in and will be in the future with the position it would have been had the breach not taken place.
Some factors to consider when calculating losses include:
- Lost profits or revenue that would have been earned had the breach not occurred.
- Additional costs that were incurred as a result of the breach.
- Savings or benefits that were not gained because of the breach and should be credited.
Claimants are required to mitigate their losses through reasonable efforts, meaning they cannot recover for any loss that could have been avoided. This is known as the mitigation principle. Additionally, if the claimant’s own actions contributed to the loss, the amount of damages recoverable may be reduced.
Equitable Remedies
Equitable remedies are discretionary and awarded by the court based on fairness and justice. These equitable remedies are typically granted when monetary compensation (damages) would not adequately remedy the breach.
Some of the equitable remedies that may be awarded by the Court to a claimant who has suffered from a breach of contact include the following.
Specific Performance
Specific performance compels the breaching party to fulfil their contractual obligations. This remedy is typically granted when:
- There is a valid and enforceable contract; and
- Damages would not provide adequate relief.
Specific performance is usually not available in cases involving:
- Promises not to do something.
- Contracts for personal services or those of a personal nature.
- Contractual obligations, the performance of which would require constant supervision.
Injunctions
An injunction compels the breaching party either to do something (mandatory injunction) or refrain from doing something (prohibitory injunction).
Injunctions may only be awarded when damages would not be sufficient to remedy the breach. They can be unconditional or subject to specific terms as deemed appropriate by the court. Although injunctions originated as an equitable remedy, they are now granted under statutory authority, specifically Section 37 of the Senior Courts Act 1981, which allows the court to issue an injunction when it is deemed just and convenient.
Orders to Account
The Court may also determine that it is fair and just to order an account. The purpose of which is to determine any profits the defendant has made from breach of trust or fiduciary duty or other wrongdoing.
An order to account is usually required to ensure the claimant obtains appropriate relief which may be either a:
- Proprietary claim over misappropriated property or profits; or
- Personal claim for equitable compensation or an account of profits.
Account of Profits
An account of profits is a discretionary remedy that is available as a remedy for (but not limited to) equitable wrongs. It requires the defendant to:
- Account for the profits they gained from their wrongdoing; and
- Surrender any gains made as a result of the breach, even if the claimant did not suffer any financially measurable or corresponding financial loss.
Breach of Contract Solicitors – Contact Us
If you have any queries regarding this topic, please contact Sali Zaher, Associate Solicitor, at S.Zaher@rfblegal.co.uk or by phone on 020 7467 5766.
Sali Zaher
Associate Solicitor
