Remedies For Business-To-Business Breach Of Contracts: What Can Be Done?
Contracts are the lynchpin of the commercial world.
Robust business-to-business contracts regulate the supply of goods and services, set out how much you have to pay and how payment is made, and state when and where products will be delivered and remedies available if a service breaks down.
However, if you are in business, you will likely have to deal with a breach of contract at some point. No matter how carefully the provisions of a contract are drafted, company disputes can and do arise.
If you are involved in a breach of contract dispute, you should first try and sort the situation out informally. However, there are times when you will have no choice but to take legal action.
In such situations, there are several remedies for breach of contract. But there are a few points to bear in mind first.
Has There Been A Breach Of Contract?
A breach of contract can be defined as the failure, without legal excuse, to perform a promise you were supposed to serve.
It can include not performing the work required or performing it poorly, failing to pay on time, not delivering goods or services, or delivering late.
Breaches are usually defined as minor, material, or fundamental.
Minor Breach Of Contract
A minor breach does not go to the heart of the agreement and can usually be remedied without involving solicitors.
Material Breach Of Contract
A material breach of contract is more severe and can cause serious damage or adversely affect the contract’s outcome.
Fundamental Breach Of Contract
A fundamental breach goes to the heart of the contract and is so serious that it can justify termination.
There can also be an anticipatory breach of contract where one party realises it cannot complete its obligations and notifies the other party. The injured party may have the right to terminate the contract and sue for damages.
Under the Limitation Act 1980, you have six years from the date of the breach of contract to bring a claim. Note that time runs from the date of the breach, not when you suffered damage.
Remedies For Breach Of Contract
The three main remedies for breach of contract are:
- specific performance (where the court makes an order that the defaulting party must perform their duties under the contract)
- injunctions
- damages
Let’s take a look at these remedies individually
Specific Performance
Specific performance is a remedy for breach of contract, which is most often used in transactions involving land and construction work.
It is only available where damages alone are not an adequate remedy and when the party making a claim cannot physically carry out the work themselves or source a like-for-like replacement.
Injunctions
An injunction is a Court Order compelling a party to do or to refrain from doing a specific act.
They can be used as a remedy for breach of contract claims in a similar way to ‘Specific Performance’. More often, they are used to prevent a company accused of a breach from failing to carry out its contractual obligations.
Damages
Damages are designed to compensate a party for any loss sustained due to the breach.
To be awarded damages for breach of contract, you must prove, on the balance of probabilities, that there is a causal connection between the breach of contract and the loss you sustained, which is not too remote.
The remoteness test comes from the Hadley v Baxendale case (1854). The claimants were millers who cleaned grain, ground it into meal and processed it into flour and bran. When a steam engine crankshaft at the mill broke, they engaged the defendants to deliver it to the manufacturers to fix. The defendant was late making the delivery, meaning the claimants lost business. At first, a jury awarded the claimants a sum of £25 (around £2,500 in today’s money). The defendant appealed, stating he did not know the late delivery would cause the claimant to suffer damages.
The court agreed with the defendant and allowed the appeal, concluding that a claimant can only recover losses in a breach of contract that was genuinely foreseeable. Sending an item to be repaired would not lead to the defendants knowing that late delivery would lead to a loss of profits.
In Summary
Breach of contract can result in the affected party suffering anything from a minor inconvenience to the collapse of their own enterprise.
If a contract you are party to has been breached, it is vital to act quickly.
With sensible, experienced legal advice, a breach of contract can be remedied, leaving you to move on with your commercial activities.
If you would like more information about remedies for breach of contract, contact our Company and Commercial Law team today.
Bennett Griffin is an award-winning solicitous firm based in West Sussex with offices in central Worthing.
Our commercial department can assist you with all business contract matters. Please contact us on 01903 229 999 or by email at info@bennett-griffin.co.uk.