EM Law are experts in supporting clients bringing or defending breach of contract claims. Our lead litigation lawyer is Joanna McKenzie who has extensive experience in advising clients on a wide range of dispute resolution matters.
What is a contract?
A contract is a legally binding agreement between two or more parties. A contract can be made in writing or by word of mouth. Sometimes, contracts can even be made by inference from the conduct of the parties and the circumstances of the case.
There are three fundamental elements in any simple contract. These are:
• Agreement – The parties must have reached, or be deemed to have reached, agreement. This is usually established by identifying a clear offer from the person making the offer which has been unconditionally accepted by the person to whom the offer is made.
• Intention to create legal relations and capacity – The parties must have intended, or be deemed to have intended, to create legal relations and they must be capable of making a contract.
• Consideration – As per the terms of the agreement, something of value must be given from one party to the other.
If any of these elements are missing, there will be no contract.
What is a breach of contract?
A breach of contract occurs where a party neglects or refuses to honour a contractual obligation. A breach by one party causes a right of action to accrue to the other party. A breach of contract can occur in various ways, for example, if Party A fails to pay for goods or services provided by Party B, or if Party B fails to provide those goods and services to an acceptable standard.
What remedies am I entitled to?
The principal remedy in English law for breach of contract is an award of damages i.e. money. The purpose of damages is to compensate the injured third party for loss, rather than to punish the wrongdoer. Damages should put the injured third party back in the position they would have been in had the breach never occurred.
Generally, there are no rigid rules for the quantification of damages in contract. The assessment of damages is a question of fact. There are, however, elements that must be proved in front of the court. Firstly, a claimant must establish the existence of a contract and that this contract was breached. Then, a claimant must prove factual causation; that loss was suffered as a direct consequence of the breach of contract. In addition, the rules on mitigation, legal causation, remoteness and contributory negligence may restrict, and in some cases prevent, a damages award.
Alternatively, parties may insert a ‘liquidated damages’ clause into their contract before a breach occurs. This clause will state the amount of money that will be available in the event of a breach of contract and will therefore eliminate the uncertainty of establishing a case in front of the court. Although the court will try to uphold such clauses, a ‘liquidated damages’ clause which is a ‘penalty’ will not be enforceable.
There are also other, less common remedies available in breach of contract claims. In some circumstances, the court may order that the party in breach must fulfil a particular term of a contract which they had previously failed to do. This is known as specific performance. Alternatively, the court may make an order for an injunction, where the party in breach must either remedy the breach of contract or refrain from causing further damage. These remedies are equitable remedies and are only available at the discretion of the court. , Unlike in the case of case damages, equitable remedies are not awarded as of right.
Should I sue for breach of contract?
Suing someone for breach of contract is not always straightforward. Before pursuing a claim you should assess the merits of your claim and consider what outcome you want. Pursuing a claim for breach of contract may not be a cost-effective response and may hamper business relations with the other party.
Before embarking on a claim, you may wish to explore methods of alternative dispute resolution. These methods may resolve the issue without the time and expense of going to court. Such methods include negotiation, mediation and early neutral evaluation.
For any questions you may have concerning breach of contract please contact Joanna McKenzie.
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