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The most important part of any contract is its legal enforceability. This means that either party can claim compensation if it does not uphold its obligations under the contract. If not for contracts, you may be out of pocket if your contracting party decides to breach your agreement. Therefore, the remedy that either party gets after a breach is a crucial part of any enforceable contract. There are several different options for you if you are the victim of a contractual breach. This article will outline what those contract breach options are and what steps you should take.

What Is a Breach of Contract?

Before we can decide what option we should undertake, it is essential to understand what constitutes a breach of contract. A breach of contract generally occurs when one party does not honour their side of the bargain. This is usually when they either do not uphold their obligations or undertake something barred due to the contract. Contractual breaches happen more often than one might imagine, so specific remedies are crucial.

Liquidated Damages

As stated earlier, breaches of contract are common in the business world. Because of this, it is common for contracting parties to include a liquidated damages clause in their contract. For example, building contracts commonly use these clauses. A liquidated damages clause is a pre-agreed figure that you insert into the contract when you are negotiating. The responsible party then pays this figure out to the party that incurred the loss. 

They are popular because there can be no dispute about what compensation should be paid. After all, both parties agreed to it at the formation of the contract. However, a court can declare that a liquidated damages clause is unenforceable. This is if the pre-determined figure is not a genuine estimate of the loss that has been incurred. 

Damages

If there is no liquidated damages clause, another option you have is seeking damages in a court of law. This means that you bring a claim that argues you suffered a loss due to a breach of contract, and the court can decide whether or not they will compensate you for this. The party that breached the contract then pays damages.

Performance of the Contract

The most common of all options a party will take following a contract breach is to try and enforce the contract. This is by requiring the other party to abide by the contractual terms they have breached. Occasionally a party may have just been in a challenging situation and will endeavour to honour their obligations under the contract. However, there are times where a business will refuse to uphold its contract. This means that you can apply to the court to enforce the contract. If the party still doesnt uphold the contract, then you can seek damages. 

Once a party has refused to uphold their contract, it can be said to have repudiated the contract. There are specific steps that you are allowed to take once a party has repudiated. One of these is to terminate the contract.

Terminate the Contract

Once a party has repudiated a contract, you are entitled to terminate the contract. Termination means you can cancel the contract with no obligations for either party. First, however, it is essential to make sure that your contracting party has repudiated. Otherwise, the court could see you to have repudiated yourself. If the court finds you to have repudiated a contract, you may be liable for damages.

Terminating a contract does not stop you from applying for damages for any loss incurred while the contract was still valid.

Key Takeaways

Legally binding contracts ensure you can get remedies in court if your contracting party breaches the contract. It is crucial that whatever contract you sign is foolproof and able to be held up in court. Otherwise, your contracting party is under no legal obligation to follow the terms specified in the contract. Following a contract breach, there are a few options and remedies available to you. First, you should determine whether you want to enforce the contract or are happy terminating it. If you want to enforce the contract, then you can ask the court to do this. Alternatively, you can terminate the contract and seek damages in court. A court will only order damages if you have suffered some loss due to the breach of contract. Sometimes, contracts will include liquidated damages clauses which must be upheld unless the court rules that they are not a fair or genuine estimate of the loss incurred. 

If you need any legal assistance with contractual breaches, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can contractual breaches occur without my knowledge?

Yes, your contracting party may try and hide their contractual breach. However, if the breach is significant, then you will realise that the contract has been breached.

Will I always get damages for a contractual breach?

No, if you have suffered no loss, the courts are unlikely to grant you damages.

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