When one party to a contract fails to fulfill its obligations under the terms of that contract, the non-breaching party is left in a bit of a quandary: the non-breaching party may be left in a financially vulnerable position or may have to breach other contracts it has with other parties (if, for instance, the non-breaching party was an intermediary between a supplier and a purchaser). Thankfully for non-breaching parties, the law allows for a lawsuit to be filed and damages sought to help the aggrieved party deal with the after-effects of a breach. These damages, however, can vary widely from one situation to another and can depend on the terms of the contract between the parties:
- Specific performance: In a few rare cases, the court may order that the breaching party perform his or her obligation under the contract. Specific performance is rarely granted because courts prefer to provide the aggrieved party with monetary damages. But if the contract was for the sale of a unique and irreplaceable item – a plot of real estate or a one-of-a-kind valuable painting, for instance – the court may order specific performance of the terms of the contract.
- Liquidated damages: To reduce the uncertainty of what would happen in the event of a breach, many contracting parties today are agreeing to what damages each party would be entitled to in the event of a breach ahead of time. These are called liquidated damages and, if agreed to, will usually be found in the terms of the contract itself. Liquidated damages are exclusive: that is, an aggrieved party is usually entitled to the agreed-upon liquidated damages and nothing more in the event of a breach. A court must find that the liquidated damages are reasonable before a court will award a party liquidated damages. In other words, a contract for the delivery of a $500 article cannot include liquidated damages for $1 million if the article is lost during transit.
- Compensatory damages: In most breach of contract cases, the aggrieved party will be entitled to compensatory damages. As the name implies, compensatory damages are designed to compensate the aggrieved party for the expenses and financial losses he or she experienced as a result of the breach. The goal of the court is often expressed thusly: “to put the aggrieved party in the same financial position he or she was in before the contract was entered into or the financial position he or she would have been in had the contract been performed.”
Damages, however, can vary widely from one situation to another and can depend on the terms of the contract between the parties.
Your Duty as an Aggrieved Party
As a non-breaching party, you have a legal obligation to minimize or mitigate the harm you suffer as the result of a breach. You cannot sit idly by once you learn of a breach: you must take action. If you were depending on a supplier to provide you with a certain part on a certain date so that a job could be completed on time and that supplier breaches its obligations, you must make a reasonable effort to locate another part supplier. Failing to mitigate your damages can result in a court awarding you less compensation by reasoning that you contributed in part to the harm you suffered.
Contact an Arizona Contract Lawyer for Help
It is helpful to have legal counsel available to you to help you draft and execute your contracts. Oftentimes liquidated damages clauses can be inserted into contracts so that the parties are clear of the consequences of a breach. Whether you are looking to enter into a contract and need assistance with crafting the terms of your document or whether you have an existing contract that the other party has breached, the Monahan Law Firm, PLC can help. We will work aggressively to protect your legal rights and obtain the maximum amount of compensatory or other damages possible on your behalf. Let us help you and your business: Call us at (623) 385-3190 today.
If you are struggling with a business contract dispute, call Monahan Law Firm, PLC at (623) 385-3190. We serve businesses located throughout the Phoenix metropolitan area, including Avondale, Buckeye, Chandler, Glendale, Mesa, Peoria, Phoenix, Sun City, Surprise, Tempe, and all of Maricopa County.