The Business Litigation Blog

What Can I Get After a Breach of a Contract?

A breach of contract occurs when one party to a contract fails to live up to the promises and expectations he or she made. Depending on the nature of the breach, the other party (sometimes called the “aggrieved,” “wronged,” or “innocent” party) may suffer anything from a minor inconvenience to a substantial financial loss. For this reason, after there has been a breach of contract the aggrieved party is usually entitled to seek one of several forms of damages or compensation  from the party that breached the contract.

Compensatory Damages: The Benefit of the Bargain

Where one party to a contract has failed to live up to its end of the bargain, the other party can ask the court for compensatory damages. This type of damage is called “compensatory” because it is designed to compensate the non-breaching party for the losses they experienced as a result of the breach of contract. In other words, this type of damage gives the aggrieved party the “benefit of the bargain.” For example, suppose that Jim paints Alex’s garage for $1,000. Then once Jim paints the garage, Alex refuses to pay. Jim would collect $1,000 and get the “benefit of the bargain.” If Jim operates on a 50% profit margin (say, $100 for paint and $400 for labor for a $1,000 garage job),  and Alex breaches the garage contract before Jim begins preparation or work for it, Jim could sue for $500, i.e., the net profit he could have earned if the bargain had been performed. If Alex breaches the contract half-way through the job, Alex would have to pay $500 for the half of the job that was completed and $250 for the net profit on the uncompleted half, plus incidental expenses (paint bought
that’s no longer usable, for example).

Restorative Damages: Pressing the ‘Reset’ Button

In contrast to compensatory damages, restorative damages are like pressing the ‘reset’ button. This type of damage is meant to “restore” both of the parties to the situation they were in before entering into the contract. So in the above example involving Jim, Alex, and the $1,000 garage job, if Alex breached the contract before Jim started painting but after Jim had bought the paint, Alex could be charged with restoring Jim to the situation he was in before the contract was signed. He would award him the money he spent getting ready to perform the job. 

Other Types of Damages: When Money is Not Enough

Depending on the specific facts of a case, other types of damages may be available. Where the contract concerns something rare or unique like a rare painting or priceless artifact, money may not be enough to give the party who was wronged the benefit of the contract. Specific performance – a court order directed to the party who breached – may be available. This would require the party who breached to follow through with their contractual obligations. For instance, if Jim sold a watch that was priceless because it was owned by a U.S. president, Alex may be able to pursue specific performance as a remedy if Jim breached a contract to sell him that watch.

Choices, choices, choices…

Although the wronged party gets to choose what type of damages to pursue in court, they may often only choose one type. But sometimes, certain types of damages can be added together. If someone had a job on a one-year contract that paid $100 a month and got fired after seven months, they could be awarded the five months of lost pay plus the cost of looking for a new job.

Deciding what type of damages to pursue takes careful consideration of the type of contract that was broken, as well as what damages will put you in the most advantageous and favorable position. At the Patterson Law Firm, we can help you understand your options after there has been a breach of contract, will advise you on what damages are available to you and help you make an informed choice. Contact us today at 312.223.1699.

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