
How can a Breach of Contract be Remedied?

Contracts are agreements between parties where a transaction of some kind is described. They are protection for all involved because no matter how trusted the parties are to one another, there is always a chance that situations will arise in which one or all of the involved parties cannot or will not fulfil their obligations. Therefore, a well-drafted, clear-cut contract should set out the expectations and duties that must be completed, including performance criteria, costs, and deadlines. Failing one or more of these could lead to a damaged party claiming a breach of contract and seeking remedies.
This article will have breach of contract explained, including a few examples and the various remedies that parties may expect when a breach occurs.
What is a breach of contract?
As mentioned above, contracts detail the obligations of the signatories in a transaction. If a party fails to meet such obligations, it can be considered a breach of contract. There are several ways to categorize breaches of contract. For this article, the focus will be on whether a breach is material or immaterial. An immaterial breach could be insignificant as it does little to no harm to the other party or to the transaction(s) anticipated by the contract as a whole, such as a minor delay in delivering materials that ultimately does not delay a larger project. A material breach would be when a failure by a party jeopardizes the other party, such as a major delay or complete failure in delivering materials that cause significant delays or causes a full stop to a project.
There are also fundamental breaches, whereby a party cannot complete their role in a contract, such as through bankruptcy, and there are anticipatory breaches, which are when a party informs another party that a breach will occur, such as a supplier warning a vendor of delayed delivery.
Examples of contract breaches
Expanding on the delivery mentioned above, we will consider a housing project where a construction company orders the delivery of 1,000 doors. The contract sets out a specific date by which the supplier must deliver the doors. If the supplier delivers the door a week late, but the construction company could still complete the houses to its schedule, this could be considered an immaterial breach. However, suppose the construction company was obligated to complete the houses two days before the doors were delivered. In that case, this could be considered a material breach, as the construction company itself might have breached a contract with the project developers.
What are the remedies for breaches of contract?
If a party believes that another party is in breach of a contract, they may wish to seek a remedy or resolution to their benefit. While a contract may include clauses defining breaches of contract, it may also outline the types of remedies available for such breaches.
Damages
Damages are payments an injured party seeks from the party they claim breached their contract. This includes:
- Compensatory damages to return the injured party to a state before the breach.
- Punitive damages punish the breaching party for their wrongful acts.
- Nominal damages that acknowledge a breach that may not have caused a significant loss.
- Liquidated damages were calculated and identified by the parties in anticipation of a potential breach.
Specific performance
There may be cases where monetary damages are inadequate to remedy a breach of contract. In such cases, a party may demand a specific performance remedy. This could entail a rare or unique item or performance that may not be replaceable. Examples of specific performance include demanding the sale of a specific property or the transfer of stock in a privately held company. In both situations, the items in question are unique and have their intrinsic value, for which a replacement may not be found elsewhere.
Cancellation and restitution
To remedy a breach, the non-breaching party may choose to cancel the contract in its entirety and demand restitution from the party who breached. Cancellation means that the parties are no longer obligated to the terms of the contract. Restitution is when a party demands to be made whole, that they are returned how they were before the breach occurred. To differentiate between compensatory damages and restitution, one could consider compensatory damages as recovering losses, while restitution seeks to remove gains from the breaching party.
THAC can help with breach of contract remedies
Handling breaches of contract must be carefully considered. This includes during the drafting of a contract to ensure that your best interests are represented if a breach were to occur, either by yourself or another party. The Thailand Arbitration Center (THAC) can assist in evaluating options, such as including a dispute resolution clause compelling ADR (e.g., arbitration, mediation) before litigation.
THAC is a world-class dispute resolution center that offers comprehensive ADR resources. Parties can access subject-matter experts as independent third parties for their mediations or arbitrations and hold their in-person or remote proceedings in THAC’s state-of-the-art facilities with full administrative support. In addition, with a convenient location in Bangkok’s city center, parties from within Thailand and around the world can easily reach us from major thoroughfares and public transportation, which are also linked to the city’s major international airports.