When a breach of contract happens (or when a breach is alleged), one or both of the parties may wish to have the contract enforced on its terms, or may try to recover for any financial harm caused by the alleged breach.
If a dispute over a contract arises and informal attempts at resolution fail, the most common method used to resolve contract disputes and enforce contracts is through lawsuits and the court system. If the amount at issue is below a certain dollar figure (usually $3,000 to $7,500 depending on the state), the parties may be able to use "small claims" court to resolve the issue.
Courts and formal lawsuits are not the only option for people and businesses involved in contract disputes. The parties can agree to have a mediator review a contract dispute, or may agree to binding arbitration of a contract dispute. These out-of-court options are two methods of "alternative dispute resolution."
No matter what avenue is chosen to remedy a breach of contract, the non-breaching party will most likely be entitled to some kind of remedy under the law.
Remedies for a Breach of Contract
When an individual or business breaches a contract, the other party to the agreement is entitled to relief (or a "remedy") under the law. The main remedies for a breach of contract are (1) damages, (2) specific performance, (3) or cancellation and restitution.
Damages
The remedy that is most often used for a breach of contract is the remedy of damages -- payment in one form or another, made by the breaching party to the non-breaching party. There are many kinds of damages, and generally speaking damages may be very specific to the kind of breach that has occurred. Following are some guidelines on damages.
Compensatory damages aim to put the non-breaching party in the position that they had been if the breach had not occurred.
Punitive damages are payments that the breaching party must make, above and beyond the point that would fully compensate the non-breaching party. Punitive damages are meant to punish a wrongful party for particularly wrongful acts, and are rarely awarded in the business contracts setting.
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