Damages Under Contract Law: Everything You Need to Know
Damages under contract law can result in restitution or compensation of some kind. An agreement ties all parties together once they agree to the terms.3 min read
Damages under contract law can result in restitution or compensation of some kind. An agreement ties all parties together once they agree to the terms. Contracts also comprise the basis of many transactions, and a party can seek damages if another party violates the terms.
When an agreement has been violated, an injured party has multiple options. Contract law centers on the notion of fairness and the compensating an aggrieved party.
The court system forces plaintiffs to choose one solution, and you cannot claim multiple forms of compensation at the same time. However, the most common remedy you’ll receive comes in the form of monetary compensation. There are several answers regarding the breach of an agreement:
- Specific performance
- Damage awards
In addition, relief remedies for a contract violation may fall in two categories: legal damage and equitable remedies. Legal damages usually entail a monetary award, while equality remedies apply while monetary remedies is not enough to constitute restitution. For instance, if you paid for the delivery of goods, but the other person failed to ship them, a certain performance decree may mandate the goods be delivered as originally intended. Specific performance is reserved when an agreement involves some type of good or benefit to another party, and standard compensation is not enough to rectify the situation.
Areas of Specific Performance
Real estate is an area where you may see such a scenario, but each piece of land or property is unique.
Specific performance may also apply regarding the sale of special items, such as antiques or other forms of valuable property. A judge will not bestow specific performance on employment agreements since the court system remains hesitant to force a person to work for another against his or her will.
When it comes to contract rescission, a judge will rescind a contract if a party breached it or if a plaintiff entered into a contract under fraud. The rescission of the contract simply reverts all parties to a state before the contract was implemented. On the other hand, contract reformation allows an agreement to be rewritten in a manner that suits all parties. The formation process occurs when a misunderstanding of some kind arises between all parties.
The amount of monetary damages will depend on the damage involved, including case law and statute. Based on certain instances, consequences or special damages could be available, but the amount could be limited. In cases where you have various remedies available to you, the best compensation amount may not be the best option.
Keep in mind that tort law is different from contract law. Contract law does not permit punitive damages (a monetary sum intended to punish a defendant for wrongdoing). Punitive damages are permitted bunder tort law (in cases of fraud or embezzlement).
If you meet certain conditions, you can cite various cases of action: contract cause of action and tort cause of action. This allows you to seek more than one remedy. Most arbitrators and judges discard a tendency in ligation for parties to over-plead a case because an attorney would automatically note misrepresentation or fraud. It usually does not benefit a party to toss in these types of causes of actions.
Even in cases where no enforceable agreements exist, the damages centered on reasonable reliance could be available and should be factored in. A judge would usually bestow monetary damage instead of ordering a person to engage in a certain performance. Other than legal a proceeding pertaining to tangible property, the courts will only grant specific performance if the statutes require it, or when the monetary damages cannot fully satisfy a plaintiff’s case.
Real property would often allow specific performance because the courts have noted that real property is unique in nature, and monetary damage will not be enough to rectify failure on the part of the defendant. In most cases, you cannot petition for monetary damages and specific performance. For compensation damages, it is a monetary sum that’s meant to compensate the victim for any losses arising from the contract. You can expect two types of monetary damages:
- Expectation Damages: Damages meant to cover what an injured party suffered
- Consequential Damages: Damages meant to reimburse injured parties for indirect losses, such as lost revenue when a machine does not get delivered on time
If you need more information on damages under contract law, post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.