Breach, Damages, and Remedies in Contract - YouTube

Okay. What happens when a party fails to perform their obligations in their

contract and a breach arises, so they fail to perform the material obligations

and it results in a breach, well what happens? Well generally a the parties

will negotiate to work out the situation this happens more often than not, okay, to

remedy the situation between themselves. If not they may resort to official

channels such as mediation, arbitration, or going to court. Now if you follow that

last path and you go to court and you litigate the matter and one party is

found liable for breach well that generally gives rise to damages, okay, but

the court is not limited to specifically awarding damages they have other

authority too but let's talk about damages first. So what are what's the

possibility for damages that a court can award? Well first I can award

compensatory damages these are damages to compensate the party for their loss.

Now there can be actual damages or those are the damages that the party can

demonstrate that they actually suffered the expectation of profits that they

expected to reap from the transaction or the actual losses that

they can show they suffered directly from the breach, those are actual damages.

Now consequential damages a second subcategory of compensatory damages are

damages that naturally flow from the breach of contract. Now they might not

have been necessarily foreseeable to the parties in the contract at the time but

nonetheless these damages are caused by the breach and naturally flow from that

breach even though they were not foreseen these damages can often be

excessive or extreme because many times they weren't contemplated by the parties.

Okay. Other types of damages would be

liquidated damages liquidated damages is when you have a provision in the

contract that states the amount of damage

that will arise or that a party will suffer in the event of breach by the

other party this is common when it would be difficult to determine the actual

damages suffered by the parties and to arrive at a compensatory damage amount,

so the parties put that provision into the contract and say in the event of a

breach we would suffer this amount of damages. Now the key thing about

liquidated damages is it cannot be a punishment to the party or when I say

that it can't be just to harm the party for the breach those that the liquidated

damages clause have to be representative of the actual compensatory amount

suffered by the party that that was that did not breach, that is when one party

breaches in the damages suffered by one party that liquidated damage this clause

has to accurately or closely represent the actual damages suffered by that

party. And lastly there's a concept called nominal damages, so what happens

when a party breaches a contract and really they're very little or hardly any

actual damages suffered by the non-breaching party. Well in that case

the court may find well we don't have any damages to award but we do award or

designate nominal damages this is a nominal amount or insignificant amount

that simply represents damages to signify that yes you breach the contract

you did wrong there's no discernable amount that the other party lost but we

award damages that are nominal and amount, this can be important because

often time contract suits lawsuits under the contract under breach of contract a

company a lawsuit in tort or civil law and nominal damages can often support or

serve as a backdrop for awarding damages in a civil action. So that's a common use

of nominal damages. Okay. So these are the various types of damages and power that

the court has. Now on top of damages the court has lots of equitable power to to

make so that the breach of contract is not so one-sided

or unfair to the non-breaching party, so the court could rescind the contract

that is make it as if the contract never existed and it has the power to put the

parties back in the positions they were prior to the agreement to force or order

one party to refund the value transferred or to provide payment for

the commensurate value of services they receive, so that would be known as

restitution to pay somebody back the value of the services they have received.

So the court has a ton of authority in that regard to do what is fair or right

to not unjustly compensate or unjustly detriment one party at the expense of

the other. So collectively those are just a handful of the powers that the court

has in a contract action and are really common examples of remedies that the

that accord employees to to address a contractual dispute.