Remedies for Breaches of Contract

A contract is an agreement or promise made between two or more parties that the courts will enforce. In some cases, the agreements and promises made in a contract are not kept by a party or more parties. Therefore, this situation called breach of contract which means failure to keep the promises or agreements of a contract. Breach of contract is a legal cause of action in which a binding agreement is not honored by one or another more of the parties.

Acts of nature, war, government regulations, disasters, strikes, civil disorder, or the curtailment of transportation services and other emergencies may make keeping the promises of a hospitality contract impossible. This could happen to anyone of us. For example, Simon is the owner of K hotel in Penang town and now he wants to build another resort hotel near to the Penang Batu Feringghi sea side so he bought the land nearby the sea side and going to build his resort hotel on next year January which he already signed the contract with the construction engineer. But because of the acts of nature like tsunami hits the area or land that he had bought last month and become damaged badly. So this contract is known as breach of contract. It is because the land is damaged badly after hit by the tsunami which causes the construction delays.

There can be a variety of reasons for breaching a contract and the consequences of such a breach can be very serious, even if the breach was unavoidable.

2.2 Three Most Important of Remedies Available for Breach of Contract

The consequences can be significant if a contracts terms are broken and the contract is enforceable. The plaintiff can pursue a variety of options when it is clear that the other party has breached a contract. Some of the remedies that may be sought include suit for specific performance, damages and injunction.

2.2.1 Suit for Specific Performance

Specific performance is applied in breach of contract actions where monetary damages are inadequate. Specific performance is being a discretionary remedy, may not be granted where damages will provide an adequate remedy or where terms of the contract are uncertain or where there has been delay in bringing the action or where there was fraud. Suit for specific performance is by compelling the parties to perform exactly what they had agreed in the agreement.

When this option is selected, the party that broke the contract is taken to court, with the plaintiff requesting that the court force the defendant to perform the specific contract terms that have not been performed or to refrain from engaging in some activity that is prohibited by the contract. For example, Lucas wanted to purchase a land to build a shopping mall, so he has signed an agreement with the real estate brokers to purchase the vacant land nearby the town area. But at the last minute is told that Lucas will not be granted the land because of the real estate brokers has got another potential client who is interested in this land and willing to pay a higher price as well. In this case, Lucas could bring legal action to force the real estate brokers to keep its promises and grant the land.

2.2.2 Liquidated Damages

Damages mean losses or costs incurred due to anothers wrongful act. Damages are granted to a party as compensation for the damage, loss or injury he or she has suffered through a breach of contract. The language of a contract will usually call for a specific penalty if the contract terms are not completed on an agreed-upon date. Both of the contract and tort law damages are the courts calculation of what it would cost to put the plaintiff back into the position he or she would have been in but for the fraud. This amount of value that has been lost is due to the breach of the contract in any of the contracts. Tort law damages are much more difficult to evaluate but generally are taken to represent the monetary value of what the plaintiff has lost in terms of damages of property, personal injuries, and quality of life. For example, a building contractor has agreed to complete the theme park beside Hard Rock hotel, penalties may be built into the contract itself if the job is not completed on time. The contractor may have offered the penalty option as an incentive to win the contract. Liquidated damages refer to these penalty payments. When a contract is breached, the liquidated damages could be imposed.

Special damages are known as the out of pocket expenses that the defendant incurs as the effect of dealing with the injuries or property loss caused by the plaintiff. These damages normally include of repair costs, medical expenses, car rentals and loss of wages.

2.2.3 Injunction

An injunction which is an equitable remedy may be interlocutory, or mandatory. It may even be prohibitory or restraining in nature. An interlocutory injunction is used to maintain the status quo of the subject matter in a pending suit whilst a mandatory injunction is a court order requiring something to be done. A prohibitory injunction stops something from being done. For example, Alan wanted to sell his restaurant due to the financial problem he is facing now so he offers his restaurant for RM6000000. Wilson is interested with his restaurant and agreed with the price given. Thus, Wilson signs a contract with Alan for take over his restaurant. After the contract has been signed, another buyer, Taylor is also interested with Alans restaurant and willing to pay higher price, RM 6300000. So Alan changed his mind and going to sell his restaurant to Taylor. Based on this case, when Wilson found out that Alan is going to sell his restaurant to Taylor, Wilson has the right to apply an injunction from the court. It is because Wilson and Alan have signed a contract before this. The court will take action and stop Alan for selling his restaurant to Taylor.

2.3 Conclusion

A contract is an agreement or promise made between two or more parties that the courts will enforce. In some cases, the agreements and promises made in a contract are not kept by a party or more parties. Therefore, this situation called breach of contract which means failure to keep the promises or agreements of a contract. Breach of contract is a legal cause of action in which a binding agreement is not honored by one or another more of the parties. There can be a variety of reasons for breaching a contract and the consequences of such a breach can be very serious, even if the breach was unavoidable.

When a breach of contract happens, the parties who involved should find out the remedies and consequences of breaching an enforceable contract. There are main three remedies which are suit for specific performance, liquidated damages and injunction. The first remedy is suit for specific performance which means compelling the parties to perform exactly what they had agreed in the agreement. While the second remedy is liquidated damages which means call for a specific penalty if the contract terms are not completed on an agreed-upon date, such as penalty payments or repair costs, medical expenses, car rentals and loss of wages. The third remedy is injunction which means stop something from being done. These three main remedies are important when we are dealing with the breach of contract.