Economic Loss in a Breach of Contract

‘….. but we signed the contract!’

What rights do I have in a breach of a contract?

Contracts are great in providing protection, reassurance and outlining commitments. However breaches do happen. In fact, it is relatively common. So, how can a contract be breached, what should be done if a breach does occur and how can we resolve this?

The starting point is to consider the contract itself. A contract can be breached if a party fails to fulfil one or more of their obligations under the contract.

A common reason why a contract has been breached is because the contract itself is unclear. Ambiguity in the wording, a misunderstanding or a disagreement can all lead to a breach. Parties must be clear with their duties in order to honour the contract accordingly.  In the event this occurs, turn to the contract itself - there may be a clause setting out potential remedies providing the parties a chance to rectify any mistakes before legal remedies are considered.

If a breach has occurred how can we resolve this?

There are several remedies available and the right one for you will depend on what you wish to achieve. Is it economic compensation? Is it to have the supplier perform the contract? We will consider economic loss below.

In the event of a loss as a result of the breach, you may seek to use one of the following remedies:

1. Damages

The amount payable for compensatory breach of contract damages is assessed by looking at the position you would have been in but for the breach. You may be entitled to contractual damages and restitutionary damages as well.

2. Specific performance

The court can make an order which directs the party in breach to perform their contractual obligations/ a specific act.

3. Injunction

The courts can issue an order which can prohibit the party in breach from doing something, or order the party to something mandatory.

4. Rescission

If you, the innocent party wishes to return to your initial position, this remedy can assist with ‘cancelling’ the contract, returning to the position prior to the contract was made.

5. Restitution

In the event the respondent gained unfair benefit or advantage (recognised as a ‘unjust enrichment’) to the breach, this remedy aims to reverse this gain as opposed to compensating the claimants losses. For example, money has been paid for a service under a contract but the performance has not been received or adequate. The payer may wish to have their money back rather than claiming damages.

We need to consider preserving your commercial relationship and therefore it is always advisable to consider negotiation first. If that is not possible, we have a variety of different venues to use to obtain these remedies:

• mediation

• alternative dispute resolution including adjudication, arbitration, arbitration or other methods

• pre-action protocol letter before action

• litigation

At Stefani Solicitors we can advise you on the most suitable remedies available and route of resolution.

Contact our Contract Solicitors on 020 8161 0518 hello@stefanisolicitors.com

Italian Contract Solicitor, Fernanda Stefani Araujo, on 020 8161 0518 hello@stefanisolicitors.com

Portuguese speaking Contract Solicitor, Fernanda Stefani Araujo, on 020 8161 0518 hello@stefanisolicitors.com

Tamil speaking Contract Solicitor, Rajah Thavalou, on 020 8161 0518 rajaht@stefanisolicitors.com

Hindi speaking Contract Solicitor, Rajah Thavalou, on 020 8161 0518 rajaht@stefanisolicitors.com