When a contract is breached, various remedies may be available to make the injured party whole. Contract remedies range from monetary damages to court orders requiring performance. Understanding available remedies helps you evaluate your options and pursue appropriate relief.
Monetary Damages
The most common contract remedy is compensatory damages—money to put you in the position you would have occupied had the contract been performed. This includes both direct losses and foreseeable consequential damages.
Expectation damages give you the benefit of your bargain—the value you expected to receive from performance. Reliance damages compensate for costs incurred in reliance on the contract. Restitution returns the value of benefits you conferred on the breaching party.
Consequential Damages
Consequential damages compensate for losses caused by the breach beyond the contract value itself—like lost profits or costs of covering breach. These must have been foreseeable at contracting. Unusual or unforeseeable consequences may not be recoverable.
Many contracts limit or exclude consequential damages. Check your contract for damage limitations.
Nominal Damages
If breach occurred but you suffered no actual loss, courts may award nominal damages—a small symbolic amount recognizing the breach. Nominal damages establish that a breach occurred even without provable financial harm.
Liquidated Damages
Liquidated damages are predetermined amounts specified in the contract for breach. Courts enforce these if they're reasonable estimates of anticipated damages and actual damages would be difficult to prove. Amounts that function as penalties are unenforceable.
Specific Performance
Specific performance is a court order requiring the breaching party to actually perform the contract. Courts typically order specific performance only when monetary damages are inadequate—usually for unique goods, real estate, or situations where money can't truly compensate.
Specific performance is an equitable remedy—courts have discretion and consider factors like feasibility, fairness, and public policy. It's rarely available for personal service contracts.
Injunctive Relief
Injunctions are court orders prohibiting certain conduct. In contract cases, injunctions might prevent the breaching party from violating non-compete agreements or disclosing trade secrets. Like specific performance, injunctive relief is equitable and discretionary.
Rescission
Rescission cancels the contract and returns parties to their pre-contract positions. This remedy is appropriate when the contract itself was flawed—formed through fraud, mistake, duress, or unconscionability.
Rescission undoes the contract rather than enforcing it. Combined with restitution, it returns any benefits exchanged.
Reformation
Reformation rewrites contract terms to reflect the parties' actual agreement when the written document contains errors or doesn't capture their true intent. Courts reform contracts for mutual mistake or unilateral mistake known to the other party.
Declaratory Judgment
A declaratory judgment asks the court to interpret the contract and declare the parties' rights before breach occurs or damages accrue. This can clarify obligations and prevent future disputes.
Punitive Damages
Unlike tort cases, punitive damages are generally unavailable for contract breach. Contract law aims to compensate, not punish. However, if the breach involves independent tortious conduct—like fraud—punitive damages may be available for the tort claim.
Mitigation Requirement
You must take reasonable steps to mitigate (reduce) your damages. Damages that could have been reasonably avoided are not recoverable. This might mean finding substitute performance, reselling goods, or otherwise minimizing losses.
Practical Considerations
Consider whether the breaching party can actually pay a judgment. Winning damages against an insolvent defendant provides no practical relief. Also consider litigation costs relative to potential recovery.
Getting Legal Help
Selecting and pursuing appropriate remedies requires strategic legal judgment. Business attorneys can evaluate which remedies are available and practical in your situation and pursue maximum recovery efficiently.