What is breach of contract and what damages may be available?

Contracts help to define a variety of different types of relationships, including many business relationships. As such, contracts set forth obligations and duties that the parties owe to one another and have mutually agreed upon. In general, a breach of contract is a violation of a contract obligation. When a party to the contract fails to perform the obligations defined in the contract, a contract breach may have occurred.

If you are engaged in a contract dispute concerning a breach of contract, you may wonder what options and remedies may be available to you for any damages suffered. The goal of contract remedies and damages is generally to place the non-breaching party in the position the non-breaching party would have been had the breach not occurred. As such, oftentimes punitive damages (or damages intended to punish) are not available in contract dispute situations. Additionally, liquidated damages may sometimes be specified in the contract as a pre-determined amount of damages for a breach of contract or some other event specified in the contract.

A type of damages referred to as compensatory damages is the most common type of damages for contract breaches. As the name suggests, compensatory damages are designed to compensate the non-breaching party for any harm the breach of contract caused. Typically, this remedy provides monetary damages for the non-breaching party to engage the good or services the breaching party failed to provide as required by the contract. In some circumstances, the breaching party may be required to perform and fulfill their obligation under the contract. Depending on the circumstances, additional remedies may also be available.

Because of the important role contracts play in business by defining many business relationships, it is important to understand how to respond to breach of contract situations. Understanding what type of damages may be available, and that the non-breaching party may be entitled to, can be helpful when a business experiences the unwanted disruption of a contract dispute.

Source: Cornell University Law School Legal Information Institute, "Damages," Accessed Dec. 29, 2014

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