BREACH OF CONTRACT DISPUTES
In all proper arrangements between two parties, a contract is created.
A contract is legally enforceable document which sets out all the rights and obligations of all parties when entering into the agreement. Simply put, a contract is a list of promises (also known as ‘contractual obligations’) that parties make between each other when entering into an agreement.
Types of contracts
There are various types of contracts parties can enter into.
- Implied (from the conduct of each of the parties)
Contracts can also sometimes be a combination of two or more of the above types of contracts.
How can a contract be breached?
In unfortunate circumstances, either party may actually or allegedly not comply with the terms of the contract.
Breaching a contract involves going against or failing to fulfil a term(s) set out in their contractual obligations under the contract.
Examples of breaches of contractual obligations include:
- Failing to perform on time;
- Performing their contractual obligations incorrectly; and/or
- Not performing at all.
Breach of express terms
An express term is a term that is clearly, or ‘expressly’, stated and defined within the written contract.
Accordingly, a party will breach an express term when they have failed to fulfil their contractual obligations outlined in one of the express terms of the written contract.
Breach of implied terms
Alternatively, an implied term is a term which has been implied within the contract, but not specifically stated or defined.
Depending on what is implied, the existence, and proof of breach, of an implied term is more difficult to prove than an express term. This is because it is not explicitly outlined in the contract for either party to rely on. Accordingly, implied terms often require interpretation by a legal professional.
Implied terms may arise from various situations including:
- Court decisions;
- Legislation; and/or
- Accepted customs within the industry in which the contract was made.
What remedies can I seek for a breach of contract?
If a party is able to successfully prove that the contract has been breached, the innocent party is entitled to ‘relief’, or a ‘remedy’ for their suffering as a result of the other party’s failure to fulfil their contractual obligations.
There are 3 main remedies a party may seek:
- Specific Performance
Damages are the most common form of relief sought by a party affected by a breah of contract.
Damages are money.
There are 4 types of damages:
- Compensatory damages
- Aims to put the innocent party in the position they were in, had the other party not breached their contractual obligations.
- Punitive damages
- Payments awarded by the Court that are above the full amount sought by the innocent party.
- Punitive damages seek to punish the breaching party for their wrongful act.
- Nominal damages
- Token damages awarded when a breach has occurred, however, no actual loss of money was proven
- Liquidated damages
- Damages that are outlined in the contract at the time of signing, should the contract be breached.
Specific performance is a court-ordered remedy which requires the breaching party to undertake a specific act or duty under the contract.
This remedy is relied on when damages would not be sufficient to assist the breaching party in rectifying the situation for the suffering party.
Restitution puts the parties back in the position they were in prior to the breach.
Contrastingly, cancellation of the contract renders the contract void – that is, relieves all parties of any obligations under the contract. This may sometimes suit the innocent party.