Contracts are a favorite tool of business people everywhere, as they lend assurance and definition to transactions. But what happens when someone doesn't do what they said they would in a contract? In the legal world, this is called a "breach," and there are a number of remedies for this situation.
For more information, see FindLaw's section on Contract Law.
Remedies in Law
When lawyers talk about "remedies in law," they are talking about money damages. For breach of contract cases, there are several different types of monetary remedies:
Compensatory damages: This is the most common breach of contract remedy. When compensatory damages are awarded, a court orders the person that breached the contract to pay the other person enough money to get what they were promised in the contract elsewhere.
For example, suppose you hire and pay someone to clean your house for $100, but he is unable to do it. You search for a new cleaning service, and the cheapest one you find will clean your house for $150. If this cost is found to be reasonable, your first cleaner would have to pay you $150 in compensatory damages, allowing you to get your house professionally cleaned as the contract intended.
Restitution: When a court orders restitution, they tell the person that breached the contract to pay the other person back. In the example above, the court would order the first cleaner to pay you back $100, since that's what you paid him to clean your house.
Punitive damages: This is a sum of money intended to punish the breaching party, and is usually reserved for cases in which something morally reprehensible happened, such as a manufacturer deliberately selling a retailer unsafe or substandard goods.
Nominal damages: A court awards nominal damages when there has been a breach of contract but no party to the contract suffered any harm.
Liquidated damages: These are damages that the parties agree to pay in the event a contract is breached.
Quantum Meruit: A court can award one party payment for what they deserve for any work that she performed before the other party breached the contract. For example, if the cleaner in the example above had cleaned half the house, and then you decided you didn't want him to finish, he can demand $50 as quantum meruit. Translated from Latin, the term means "as much as he deserved."
Remedies in Equity
A remedy in equity is when the court orders someone do something. This can also be called "injunctive relief." In breach of contract cases, this can look like any of the following:
Cancellation: The court cancels the contract and decides that the parties are no longer bound by it.
Specific Performance: This is when the court forces the breaching party to perform the service or deliver the goods that they promised in the contract. This is typically reserved for cases when the goods or services are unique and no other remedy will suffice.
Facing a Breach of Contract Lawsuit? Protect Your Business and Call an Attorney
The reason why contracts carry so much weight is precisely due to their enforcement, as an unenforced contract is not worth the paper it's printed on. So if you've been accused of breaching a contract or believe another party has breached a contract with you, you'll probably want legal representation. Failing to do so could cost you a fortune or even your business. Find a small business attorney licensed to practice in your state to get started.