Contracts
8. Breach & Court Action
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 16 Aug 2015
- Legal action can be brought in an appropriate court or tribunal for breach of contract.
- There are a number of different remedies a court can award in case of a breach of contract.
- A court may order rescission.
- Rescission is where the court cancels the contract and attempts to restore the parties to the original position that they were in prior to entering the contract. This means that any goods or money that was transferred is returned to the original owner.
- In order to claim this remedy the wronged party must take prompt action and it must be possible to restore the parties to their previous position. For example if the goods supplied under the contract were used as raw materials in a manufacturing process and are no longer in their original form then rescission may not be available.
- A court may order damages.
- Damages are a sum of money awarded to the wronged party to compensate them for the loss caused by the breach of contract.
- The intention of damages is to put the wronged party in the position they would have been in had the contract been performed. An additional sum may be awarded where it is proved that the party in breach of the contract knew that the wronged party would suffer a special or unusual loss.
- When negotiating the contract or at a later time the parties can agree to a specific amount that would be payable as damages in the event of a breach. This can be included as a clause in their contract. A common example of this is where a deposit is forfeited in the event a party does not go through with the contract.
- The wronged party has an obligation to minimise the loss that they suffer. For example if a buyer has refused to complete a sale but someone else has offered to buy the goods from you then you should sell them to minimise your damage. You can claim any difference between the price you were paid and the price you would have received under the contract as damages from the buyer who breached the contract.
- A court may order specific performance.
- Specific performance is where a party asks the court to order the other party to comply with the contract and do what they were refusing to do.
- This remedy will only be awarded if:
- there has been no misconduct by the party asking for specific performance;
- the court does not have to supervise the performance of services; and
- any other remedy would not be adequate.
- For example if the contract was for the supply of a unique antique then specific performance may be ordered if the seller refused to deliver the item.
- A court may order an injunction.
- An injunction is an order issued by the court to prevent a party from doing something.
- A party can go to court seeking an injunction even while other dispute resolution processes are underway. An example of when this may happen is where one party is concerned that the other party will move or get rid of their assets in order to avoid paying any settlement money on the dispute.
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