Remedies for
Breach of Contract
Master the legal remedies available when a contract is breached: from compensatory damages to specific performance and beyond.
What Is a Breach of Contract?
A breach of contract occurs when one party fails to perform any term of a contract without a legitimate legal excuse. Breaches can be material (substantial failure destroying the contract's value) or minor (partial failure that does not defeat the purpose of the contract).
Material vs. Minor Breach
Categories of Contract Remedies
Compensatory Damages: The Core Remedy
Compensatory damages aim to give the non-breaching party the benefit of the bargain. There are two key measures:
Consequential & Incidental Damages
Liquidated, Nominal & Punitive Damages
Equitable Remedies
Equitable remedies are granted when monetary damages are inadequate. They are discretionary, meaning the court decides based on fairness.
Rescission & Restitution
Rescission cancels the contract and restores parties to their pre-contract positions. Restitution requires the return of any benefits conferred.
Legal vs. Equitable Remedies
| Legal Remedies | Equitable Remedies | |
|---|---|---|
| Nature | Monetary damages | Non-monetary court orders |
| Availability | Available as of right | Discretionary (court decides) |
| Prerequisite | Provable financial loss | Money damages must be inadequate |
| Examples | Compensatory, consequential, liquidated | Specific performance, injunction, reformation |
| UCC Sales | Cover, market price differential | Specific performance for unique goods |
The Duty to Mitigate
The non-breaching party has an affirmative duty to mitigate (minimize) damages. Failure to take reasonable steps to reduce losses will reduce the recovery.
How to Apply Remedies: Step-by-Step
Example 1: Sale of Goods
Example 2: Unique Property
Example 3: Liquidated Damages Clause
Common Mistakes
UCC vs. Common Law Remedies
| UCC (Sale of Goods) | Common Law (Services/Land) | |
|---|---|---|
| Buyer's Remedy | Cover or market price differential | Expectation damages |
| Seller's Remedy | Resale or contract-market differential | Expectation damages |
| Specific Performance | Unique goods only | Real property; personal services (rarely) |
| Consequential | Buyer only (foreseeable) | Either party (foreseeable) |
| Liquidated Damages | Reasonable; not unconscionable | Reasonable estimate; difficult to calculate |
| Mitigation | Required (cover/resale) | Required (comparable substitute) |
Question 1 of 5
Alpha contracts to deliver custom machinery to Beta for \(\$100,000\). Alpha breaches. Beta purchases substitute machinery for \(\$120,000\) and incurs \(\$3,000\) in shipping. What is Beta's total recovery?
Question 2 of 5
In which of the following situations is specific performance most likely to be granted?
Question 3 of 5
A construction contract contains a liquidated damages clause requiring \(\$5,000\) per day for delays. The actual daily losses are approximately \(\$200\). Is this clause enforceable?
Question 4 of 5
Seller breaches a contract to deliver goods to Buyer. Buyer takes no action to find replacement goods and sues for lost profits of \(\$50,000\). Substitute goods were readily available for \(\$5,000\) above the contract price. What can Buyer likely recover?
Question 5 of 5
Which of the following best describes consequential damages?