Breach of Contract: What Can You Claim?
These claims are typically called remedies for breach of contract. There are 2 types of remedies – common law remedies and equitable remedies.
- Common law remedies include damages and quantum meruit.
- Equitable remedies include specific performance and injunctions.
The main practical difference between these 2 types of remedies is that equitable remedies are at the discretion of the courts – even when you win the case in court, the court may decline to award equitable remedies, but it must always allow for common law damages to be claimed and awarded because damages are available ‘as of right’.
Liquidated Damages
Liquidated damages depend on liquidated damages clauses in contracts that specify the amount of damages the aggrieved party shall receive in case of breach by the other party. Generally, the courts will uphold such clauses without requiring the aggrieved party to prove that he or she has suffered a loss. Such clauses often include upper limits to the amount which the breaching party has to pay the aggrieved party. Such clauses are commonly found in construction contracts, cleaning contracts and security guard contracts.
However, it is important to keep in mind that the law will uphold such liquidated damages only if they are a genuine pre-estimate of the loss that might be suffered as a result of the breach. Such damages should not be a penalty (punishment or threat).
Unliquidated Damages
For unliquidated damages, the basic legal principle is that the courts would try to place the innocent party in the same position (as far as monetary awards can do so) that it would have been in if the contract had not been breached.
If the contract is devoid of a liquidated damages clause, then the law would require the aggrieved party to prove the loss it suffered.
In determining whether unliquidated damages should be awarded, the courts will look at:
- Causation – whether the breach caused the loss suffered by the aggrieved party;
- The remoteness of Damage – whether the loss arose naturally (and not remotely) as a result of the breach, and whether, at the time the contract was entered into, the party in breach contemplated or could have reasonably foreseen that such loss would result from the breach; and
- Mitigation of Loss – whether the aggrieved party took reasonable steps to mitigate or reduce its loss.
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Quantifying Damages
In determining the exact amount or quantum of damages, the courts look into expectation loss – the amount the innocent party would have gained if the contract had been properly performed – and reliance loss – the amount the innocent party spent in preparing to perform the contract. In some cases where there is no expectation loss or reliance loss, the aggrieved or innocent party does not lose anything. What happens is that the party in breach gains something wrongfully. The law would then use restitution as a basis to award damages against a party that had been unjustly enriched by its breach of a contract.
Quantum Meruit
This latin term may be translated as “as much as he deserves”. This claim may be successfully made by parties in the following situations:
- Where one party (often the innocent or aggrieved party) accepts the partial performance of a contract by the breaching party, it must pay for the partial work done because it has benefited from it.
- Where one party is prevented from fully performing its part of the bargain due to the actions of the other party; the prevented party deserves to be paid for work done.
- When a contract does not specify the amount that should be paid for services.
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Specific Performance
Specific performance is, put simply, an order of court requiring a party to do what they promised to do in the contract. As mentioned earlier, the courts have full discretion in these orders, and these orders are not made “as of right”.
Further, specific performance is ordered only when damages are an inadequate remedy. However, specific performance, no matter how inadequate damages may be as a remedy, is not usually awarded if the performance would require supervision by the court.
Orders for specific performance are typically awarded in cases where what is being sold or was promised is unique – like land, rare antiques and company shares.
Injunctions
Just like specific performance, injunctions are awarded only if damages are inadequate.
Injunctions may be prohibitory or mandatory.
Prohibitory injunctions prohibits the party at fault from breaching the contract. Mandatory injunctions, which are less common, order a party to carry out positive obligations to reverse a breach of contract that has already been committed.
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