GENERAL PRINCIPLES: REMEDIES FOR BREACH OF CONTRACT
Upon concluding a contract, the parties involved are bound by the terms of the agreement. Should any of the parties not perform their part as agreed in the contract (without a lawful excuse), a breach of contract occurs. When a party has breached the terms of the agreement, the aggrieved party(ies) to the contract have a number of options available to them. These options, called remedies, usually include damages, specific performance, and contract cancellation. The available remedies are, however, also dependent on stipulated terms of the contract.
Damages are a monetary payment made by the breaching party to the aggrieved party, which usually aims to put the aggrieved party in the same position as it would have been had the breach not taken place. The damages that may be claimed include actual damages and loss of profits. The aggrieved party is only entitled to the damages that he or she can prove. Once the damages have been proved, the aggrieved party will need to quantify the damages, which can be difficult. When claiming damages, the aggrieved party should ensure that it has taken all reasonable steps to minimise its losses. This is called mitigation of damages.
This remedy is a way of forcing the breaching party to perform what was agreed to in the contract. The aggrieved party will need to apply to Court for an order that will compel the breaching party to perform in terms of the contract.
Generally, the aggrieved party has the right to this remedy, but the Court does have the discretion to refuse to make such an order. For example, the Court may refuse to grant an order for specific performance if the performance is impossible. If an order for specific performance is granted by the Court and the breaching party still fails to perform, the breaching party may be held in contempt of Court.
If the aggrieved party wishes to cancel a contract, the most important question is whether or not the contract included a cancellation clause. If no cancellation clause exists, the aggrieved party’s right to cancel is dependent on a number of factors, including the materiality of the breach. However, if the contract includes a cancellation clause, it is easier to utilise this remedy. It is important to ensure that all aspects of the cancellation clause are complied with, including giving notice where required. If a contract is validly cancelled, each party has the duty to return what was received under the contract.
There are a number of remedies available where a breach of contract has taken place. The consequences of a breach of contract can be costly so it is important to ensure that all parties understand the terms of a contract, and are happy with what they are agreeing to, before signing the agreement.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E & OE).
Written by: Simthandile Cagwe (Candidate Attorney)
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