Overview

Once a contract is formed, each party must perform its promises. Failure to do so—breach—triggers legal remedies that aim to put the injured party in the position it would have been in had the contract been fulfilled. This topic explains performance standards, types of breach, and the monetary or equitable relief available.

Key Concepts

• Performance Standards: Complete performance, substantial performance (minor defects), and tender of performance.
• Types of Breach: Material breach, minor breach, anticipatory repudiation.
• Legal Remedies (Damages):
  • Compensatory (Expectation) – direct loss + incidental expenses.
  • Consequential – foreseeable special losses (Hadley rule).
  • Liquidated – agreed amount if genuine pre‑estimate.
  • Nominal – symbolic $1 when no provable loss.
  • Punitive – rare in contract unless tort overlay (fraud).
• Equitable Remedies: Specific performance, injunction, rescission & restitution, reformation.
• Bars to Recovery: Statute of limitations, bankruptcy discharge, laches, failure to mitigate damages.

Step-by-Step Example

Scenario: A furniture maker agrees to deliver 50 custom walnut chairs to a restaurant for $20,000 ($400 each). The maker delivers none. The restaurant buys substitute chairs for $25,000.

Step 1 – Breach: Non‑delivery is a material breach.

Step 2 – Cover Purchase: Restaurant’s cover price = $25,000. Contract price = $20,000.

Step 3 – Damages Calculation: Direct damages = $25,000 − $20,000 = $5,000. Add any incidental costs (e.g., rush shipping) to arrive at total compensatory damages.

Step 4 – Mitigation Duty: Buying substitute chairs was reasonable; damages are recoverable.

Answer: The restaurant can recover $5,000 in compensatory damages plus incidental expenses because the seller’s material breach forced a higher-priced cover.

Quick Tip