Remedies available for breach of contract
Five remedies are available in relation to a breach of contract involving real property.
Rescission
Rescission involves the revocation or cancelation of a contract and that contract is then set aside; e.g., the buyer requests the court to set aside a contract because the builder has encountered financial difficulties, has only begun renovation work and is apparently unable to complete the job.
Damages
Damages involve compensation for losses incurred. The most common remedy is monetary damages awarded by a court to recompense an injured party for a loss suffered by reason of a breach. Every breach gives rise to a right to this remedy and the measure of damages recoverable is the amount that may fairly and reasonably be considered either:
Arising naturally, (i.e., according to the usual course of events occurring from such breach of contract itself); or
As may reasonably be supposed to have been in the contemplation of the parties at the time the contract was made.
Damages are given as financial compensation and not as a punishment for the breach or for the motive or manner of the breach and so the plaintiff in a damage action must prove the actual amount of the damages. The plaintiff also has a duty to mitigate those damages by taking any reasonable steps available following the breach in order to reduce the extent of the loss.
EXAMPLE - Insufficient Funds
Seller Smith sells his property unconditionally and Buyer Jones refuses to close due to insufficient funds. Smith places the property back on the market to find a new buyer. The damages normally sought would include the cost of re-marketing and disposing of the property, incidental costs incurred by the seller (e.g., cost of borrowing funds if a subsequent purchase was affected), any loss incurred if the property sold at a lesser price than originally agreed to with Jones, and a sum of money for inconvenience and related matters.
Quantum Meruit
Quantum meruit is a determination by the courts of a reasonable sum of money for work or services performed. If a contract has been discharged by breach after the injured party has done part but not all of what was promised under the contract, that person is entitled to the reasonable value (quantum meruit) of what was done from the party who committed the breach.
EXAMPLE - The Property Management Contract
ABC Realty Inc. enters into an exclusive, two-year agreement to manage a building with a contract where compensation is received semi-annually for units rented during the preceding six month period. Owner Smith breaches the contract eight months into the contract period and refuses to pay for ten units rented during the first six-month period. ABC Realty Inc. is entitled to compensation for the work performed.
Specific Performance
Specific performance takes the form of a decree or order of the court that the party in breach must do the specific thing that was promised. This is a discretionary remedy and not an absolute right. It will be awarded only where damages are not an adequate remedy, the contract is fair and just, and the injured party acts promptly and fairly in claiming a right to specific performance.
EXAMPLE - The Adjacent Land
Buyer Jones has a binding contract to purchase adjacent lands to his property for the purpose of expanding his business enterprise. The acquisition of this property is vital to meet local zoning regulations and environmental requirements. Prior to closing, Jones has already started expansion/ renovation work in anticipation of the closing. The owner of the land refuses to close and lacks any substantive reason for doing so. Jones sues for specific performance.
An agreement to sell land is an example of the sort of contract that may be specifically enforceable, given the character of the particular land or its importance to the buyer. It may be that damages would be insufficient compensation.
Injunction
Where the broken promise was to refrain from doing something, the court may award an injunction to restrain the offending party from doing that act. More simply put, an injunction is a court order stopping a party from continuing a breach.
The court will not compel the performance of a contract for personal service or employment, but may award an injunction to prevent the offending party from serving or performing elsewhere. The granting of an injunction, also a discretionary remedy, will be subject to the same conditions as in the case of specific performance.
A common case involves the breach of a covenant not to use the premises in a particular manner. A case might involve the tenant in a shopping plaza who agrees under the lease not to offer a specific service within the plaza and then proceeds to breach the agreement by offering that service.
Another instance might involve a tenant in a large industrial building who has specifically agreed not to store, process or otherwise handle certain hazardous waste products on the premises and then breaches that agreement following occupancy.
In discussing remedies for breach of contract, the issues of costs and interest frequently arise. The successful litigant may be awarded interest on the amounts given. That interest may be calculated from the date of the breach and can vary depending on the prime rate.
The court can also award costs that normally involve all disbursements paid to court officials and others involved in the litigation and a proportion of the costs that are payable to the litigant’s own lawyer. The award will vary with the amount of the claim and the particular court jurisdiction. In rare situations, the judge can order full compensation of all costs.
