Legal remedies for a breach of contract

Once a court decides that there has been a breach of contract, it must then judge how the party in breach must compensate the other party. The usual award for damages — monetary compensation. The court must be satisfied that there was a contract, that one party is in breach, and that the other party has suffered some loss because of the breach. In addition to financial loss a plaintiff sometimes tries to claim damages for mental distress caused by the breach of contract. Such claims are less successful in Britain than in the U. S., except for holiday contracts (though often successful in tort actions).

A court will award damages only for loss closely connected with the defendant's breach. For example, in the 1949 English case of Victoria Laudry vs. Hewman Industries, the defendants were five months late in delivering a new boiler for the laundry. The laundry claimed damages first for profits they probably have made by being able to increase their regular laundry customers if they had the boiler on time; and second, for profits they might have made if the boiler had enabled them to take on new dyeing contracts. The courts decided that the first claim was reasonable, but that the second was too remote. Remoteness is an important concept in both contract and tort.

In deciding just how much in damages to award, courts try to put the plaintiff into the same financial position that he would have been in if the defendant had carried out the contract properly.

Instead of damages, a plaintiff sometimes asks the court to force the other contractor to carry out the contract. In English law this is called specific performance. The court will not agree to do this if it causes hardship to the defendant, however, or if it is no longer possible or practical to carry out contract. Sometimes the court decides to award damages instead of specific performance, and sometimes it awards both. A plaintiff may also ask the court to award an injunction against the defendant, that is, to order the defendant not to do something which would be in breach of contract. Specific performance and injunctions are remedies which were developed by the courts of Equity because of inadequacies in the Common courts.

Contract law is a central part of legal systems all over the world. It is especially important in international business, where the parties try to specify all the parts of their agreement in a clear written contract so that differences of law and custom between their countries can be avoided. It is sometimes said that some societies are much more “contractual” than others. For example, in the United States people are accustomed to signing contracts connected with daily life. Some people even draw up a contract with a girlfriend or boyfriend when they start living together in the hope of reducing arguments if they part later. On the other hand, Japanese people rarely even sign contracts of employment when they take a new job, believing that custom and social obligation will be enough to resolve any differences. Perhaps it is not a question of one society being more contractual than another, but rather that in some societies people are more likely to use lawyers and courts to sort out their disagreements, and they therefore feel the need to have precise evidence of their agreements in the form of written contracts.

1. Discuss three remedies for a breach of contract given in the text.

2. Compare these remedies with those existing in your jurisdiction.

Ex. 9. Look through the texts again and find at least one sentence for each of the following word combinations:

1. to take legal action, 2. to charge money, 3. to disprove one’s claim, 4. case law systems, 5. to be binding in law, 6. offer and acceptance, 7. valuable consideration, 8. to become a precedent, 9. reference to previous agreements, 10. an enforceable contract, 11. to be legally entitled to contract, 12. a breach of contract, 13. to claim damages, 14. specific performance, 15. to award an injunction, 16. to avoid differences of law and custom, 17. to draw up a contract.

Translate these sentences into Russian.

Ex. 10. Read through the text quickly. Then match these questions (a-e) with the paragraphs that answer them (1-5).

a) What form can an enforceable contract take?

b) When do third parties possess enforceable rights in a contract?

c) Upon which grounds related to the formation of a contract may its validity be attacked?

d) What are the elements of an enforceable contract?

e) What are the essential terms of a contract?

1. Under the common law, a promise becomes an enforceable contract when there is an offer by one party (offeror) that is accepted by the other party (offeree) with the exchange of legally sufficient consideration (a gift or donation does not generally count as consideration); hence the equation learned by law students: offer + acceptance + consideration = contract. The law regards a counter offer as a rejection of the offer. Therefore, a counter offer does not serve to form a contract unless, of course, the counter offer is accepted by the original offeror.

2. For a promise to become an enforceable contract, the parties must also agree on the essential terms of the contract such as price and subject matter. Nevertheless, courts will enforce a vague or indefinite contract under certain circumstances, such as when the conduct of the parties, as opposed to the written instrument, manifests sufficient certainty as to the terms of the agreement.

3. An enforceable agreement may be manifested in either written or oral words (an express contract) or by conduct or some combination of conduct and words (an implied contract). There are exceptions to this general rule. For example, the Statute of Frauds requires that all contracts involving the sale of real property be in writing.

4. In a contractual dispute, certain defences to the formation of a contract may permit a party to escape his/her obligations under the contract. For example, illegality of the subject matter, fraud in the inducement, duress and the lack of legal capacity to contract all enable a party to attack the validity of a contract.

5. In some cases, individuals/companies who are not a party to a particular contract may nevertheless have enforceable rights under the contract. For example, contract made for the benefit of a third party (third-party beneficiary contracts) may be enforceable by the third party. An original party to a contract may also subsequently transfer his rights/duties under the contract to a third party by way of an assignment of rights or delegation of duties. This third party is called the assignee in an assignment of rights and the delegate in a delegation of duties.

Now look through paragraph 4 again and find 4 defences to the formation of a contract, then match them with the following definitions:

a) when one party does not have the ability to enter into a legal contract, i.e. is not of legal age, is insane or is a convict or enemy alien;

b) when one party induces into entering into a contract by use or threat of force, violence, economic pressure or other similar means;

c) when either the subject matter (e.g. the sale of illegal drugs) or the consideration of a contract is illegal;

d) when one party is intentionally misled about the terms, quality or other aspect of the contractual relationship that leads the party to enter into the transaction.

Ex. 11. Here is a brief summary of the law of contract. Complete the extracts using the words in the box.

agreement, breach, capacity, consideration, damages, fraud, illegal, obligation, oral, performance, property, signed, terms

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