The Other Party Breached Our Contract - What are My Rights?

By Kevin Sandstrom | Civil Litigation

The remedies for breach of contract can be somewhat confusing. A breach of contract means one of the parties has failed to perform a “material” part of the contract. A term is “material” if it is an important, primary, or significant aspect of the contract.

More often than not, the remedy for a material breach is that the non-breaching party is generally both excused from their own further performance under the contract (if any remains due), and also entitled to seek from the breaching party a court-ordered award of monetary damages that result from the breach. As a general proposition, the non-breaching party must prove their damages with reasonable certainty and prove a causal link between the breach of contract and the damages suffered.

What are damages?

Damages includes those direct damages that immediately stem from the breach as well as the potential for indirect “special damages,” which is then broken down further into “incidental” and “consequential” damages. Incidental damages are extra expenses incurred by a party as a result of the breach. Consequential damages are losses to the party that indirectly flow from the breach, such as damage to other property, damage to persons, lost profits, lost goodwill/customers, lost use. Consequential damages must generally be a known or reasonably foreseeable result of the breach—if an item of claimed consequential damages is way out in left field, it will probably not be awarded.

Even in the situation of a “non-material” breach, the party who breached may still be responsible for damages. But a “non-material” breach is generally more minor, and it will be incumbent upon the non-breaching party to prove they actually suffered damages from this minor breach.

Can I rescind a contract?

Rescission” is the concept of the non-breaching party essentially requesting to undo and terminate the contract as if it never existed. A party seeking to rescind a contract must prove that the breach was material. Upon such proof and request for rescission, the court will attempt to place the parties back in the position that existed before the contract was formed. The rescinding party cannot, however, seek any additional monetary damages that may have been suffered. To obtain such additional monetary damages, the non-breaching party must affirm the existence of the contract, leave the parties rights and responsibilities as they stand, and seek to calculate the additional monetary damages suffered.

Can I enforce completion of a contract?

Clients often want to know if they can force a breaching party to affirmatively perform what remains due under the contract. This is called “specific performance” or sometimes “curing the default,” and frequently, the answer is “no,” a court will not force a breaching party to complete its performance. The parties can always agree to complete their performances to remedy a dispute, but courts will usually not force them to do so. The remedy from the court is to award money damages.

Specific performance can be awarded, however, in certain circumstances. The contract has to be so unique that the non-breaching party will be unable to obtain substitute performance elsewhere. The most typical example is for the purchase of real estate. The law presumes that real estate is inherently unique and may allow a buyer to force a sale by a breaching/reluctant seller to be completed to ensure the buyer gets the benefit of obtaining the unique real estate that they contracted to buy.

Can the non-breaching party be required to perform any action?

Another issue that can crop up is an obligation on the non-breaching party to “mitigate” its damages, in other words make reasonable efforts to reduce the accumulation of damages if possible. A typical example is a landlord’s obligation to attempt to find a replacement renter if an existing renter breaches the lease and moves out early. If the landlord fails or refuses to make such efforts, a court might deny some of the landlord’s lost rent damages due to their own failure to mitigate their damages.

In short, the issue of breach of contract remedies that might exist in favor of a non-breaching party are varied and sometimes quite complex. It is wise to consult with an attorney to help identify what remedies can be sought if someone has breached a contract.

You can also call our Stillwater, MN office at 651-439-2878 or Hudson, WI office at 715-386-3733.

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