Do you know the options available to you in California if a business you contracted with has breached your contract? The law provides several different options, including the main remedy for breach of contract – an award of monetary damages – as well as rescission, restitution, and specific performance. Here, we’ll give you a brief overview of each of these options that are known formally as “remedies.”
What is a Breach of Contract?
Simply put, a breach of contract is a failure of an agreement because one or more of the parties to the contract failed to meet the terms agreed to in the contract. Sometimes, the breach may be foreseeable; sometimes not. It may be done deliberately, but often it is not. A breach of a contract could entail, for example, failure by a party to make payments, to manufacture or deliver a product, or even to perform the act or service that was agreed to in the first place (for example, to act in a play, or to construct a building according to the agreed-upon specifications).
If you have contracted with another party, and that party has breached your agreement, the law provides several possible civil (not criminal) remedies. If you’re uncertain which remedies are appropriate for your particular situation, it can be helpful to consult with an experienced contract attorney to help you explore your options.
Can I Get Monetary Damages for my Breach of Contract Claim in Orange County?
Damages are a monetary award the court may order when, following a trial, the aggrieved party has proved that the contract was breached. There are two main types of damages available: general damages and special damages.
General damages, also called direct damages, are the damages that flow directly and necessarily from the breach. This means they are the natural result of the breach. Generally, these are losses one would expect to be reimbursed for by the breaching party. For example, let’s imagine that you and Amazing Sink Co. enter into a contract where the company agrees to supply you with two farmhouse-style kitchen sinks on July 1. The company knows that July 1 is important to you because you will be showing your property to potential buyers during a Grand Open House on July 2, and you’ve emphasized the kitchen features in your advertisements. If you don’t have the sinks by July 1 (or if you have the wrong type of sink or the wrong number of sinks), potential buyers may be discouraged from making a good offer because of the state of the kitchen. You may have to incur greater expense because of Awesome Sink Co.’s failure to deliver by going to OK Sink Co. 100 miles away and purchasing the same sinks for twice the price in order to make your Grand Open House successful. In order to recover general damages, you will need to prove in court that, when the contract was made, both you and Awesome Sink Co. knew or could reasonably have foreseen that the harm was likely to occur in the ordinary course of events as the result of Awesome Sink Co. not supplying the two farmhouse-style kitchen sinks on July 1.
The other type of damages are special damages, also called consequential damages. Special damages may be awarded to an aggrieved party when he or she proves in court that, when the parties made the contract, the breaching party knew or reasonably should have known of special circumstances leading to the harm. Here, the judge usually must determine beforehand whether a particular damage would be classified as “special.” For example, let’s imagine again that you and Amazing Sink Co. enter into the same contract described in the preceding example, however, Amazing Sink Co. knows that you need the farmhouse-style kitchen sinks by July 1 because you have another contract with the developer to finish the kitchen by July 2. You must prove that a special purpose was intended to be accomplished through the contract: you required delivery of two farmhouse kitchen sinks by July 1, or you would incur significantly greater expenses to meet your contractual obligations with the developer. If you prove in court that Amazing Sink Co. knew of this special purpose at the time you entered into the contract, and that the special purpose was not accomplished as a result of Amazing Sink Co.’s breach, you may be awarded special damages.
You could be limited in the award of damages if you fail to mitigate, that is, to minimize the harm you suffer as a result of the breach. For example, let’s imagine that you rent a warehouse space to W. House for one year, but W. House only pays rent for the first six months of the year, breaching the contract. Even though you only receive half of what you were expecting from W. House, your economic harm can be reduced if you actively and diligently try to re-rent the warehouse after W. House stops paying rent. If you fail to act diligently, a court may see this as a failure to mitigate. The key here is the reasonableness of your efforts in light of the circumstances facing you at the time, including your ability to make efforts or expenditures without undue risk or hardship. If you make reasonable efforts to avoid harm, then the award should include reasonable amounts that you spent for your purpose.
What is Rescission?
Rescission is a remedy a court may order that cancels the contract and puts each party back in the position it would have occupied had the contract never existed. A contract may be rescinded (a) if allowed pursuant to a specific law governing the contract; (b) if the contract was obtained through fraud; or if all parties to the contract consent. Other grounds for rescission also may apply, depending on the terms of and circumstances surrounding your contract.
What is Restitution?
Restitution is a court-ordered remedy that requires the breaching party who has benefited from the contract, to compensate the party who has been harmed by the breaching party’s conduct. Restitution is an alternative remedy to damages and is commonly used to prevent “unjust enrichment” of the breaching party. In the case of the previous example with Amazing Sink Co., Amazing Sink Co., as the breaching party, would have to compensate you if they benefited from the breach of contract in any way.
What is Specific Performance?
Specific performance is a court-ordered remedy that is available in certain circumstances when monetary damages are not enough to compensate the aggrieved party. Here, a court will force a breaching party to fulfill its promises under the terms of the contract rather than award the harmed party monetary damages. Specific performance is often but not always used in real estate contract disputes, for example.
There are many nuances to the law involving breach of contract and available remedies. Contact our breach of contract attorneys to discuss the specifics of your situation and your legal options. You can reach us by phone or by completing the Contact Us form on this page.