Breaching a contract can have significant legal repercussions for the party that is found to be in breach. And while most people assume that a lawsuit is an inevitable outcome, this isn’t always the case. Contracts are complicated and no two are alike. Because of the uniqueness of these agreements, there are several different potential ways to handle a breach. Janelle Tanenbaum, Esq. lists 7 of the most Common Remedies To A Breach of Contract in Massachusetts, below.
First, what exactly is a breach? Simply put, it’s the failure of a party to abide by the terms of the contract. Breaches are usually specific to the contract terms and may include such actions (or inactions) as:
- Failure to pay for or provide goods or services
- Low-quality or defective services rendered
- Broken, dangerous, low-quality, or otherwise defective goods exchanged
- Failure to perform under the contract terms (e.g. provide a certain service) on time
- Breach of an express or implied warranty
- Doing something the contract did not allow, such as violating a non-compete clause in an employment contract
7 Remedies to a Breach of Contract
If a breach has occurred, the aggrieved party may be able to pursue the following remedies:
1. Lawsuit for damages
This is arguably the most common remedy for a breach of contract. Compensatory damages, which are designed to compensate the plaintiff for actual monetary losses, are usually awarded for a breach. Punitive damages, which punish the breaching party, are rarely awarded. There may be other types of damages available depending on the nature of the contract.
2. Mechanic’s lien
Also known as a lien, this is used by contractors and subcontractors to secure payment for goods or services provided. It is often used in the context of construction, in which labor and materials have been provided but the property owner or general contractor has failed to pay. Although there are specific procedures that must be followed to perfect a lien (which basically allows the aggrieved party to collect what is owed), this is a powerful tool that may be easier than filing a lawsuit.
3. Lawsuit for specific performance
Parties are expected to perform according to the contract terms, and the failure to do so may lead to a lawsuit for breach of contract. But instead of seeking monetary damages, the aggrieved party may ask that the breaching party be compelled to perform as agreed under the contract. This is known as specific performance and is typically used where money cannot adequately compensate the aggrieved party (for example, in a contract involving the exchange of real property). Generally specific performance is not allowed as a remedy for breach of personal service or employment contracts.
Another common remedy to a breach of contract in Massachusetts is to rescind a contract or to essentially revoke or cancel it. Rescission is a remedy that may be available if there is fraud, mutual mistake, lack of capacity, or another problem with the contract. If the contract is rescinded, any money that was paid is returned to its owner.
Courts have the power to reform some contracts to reflect the parties’ true intent. However, reformation is no simple matter, and certain requirements must be met. For instance, there must at least be mutual mistakes as to the terms of the contract. Other elements may need to be proven to successfully petition for this remedy.
6. Alternative dispute resolution (ADR)
When parties have a contract dispute, they can choose to resolve it themselves using different alternative dispute resolution (ADR) methods. Two of the most popular ADR tools are mediation and arbitration. With mediation, a neutral third party facilitates negotiations between the parties so they can arrive at a mutually beneficial resolution. Arbitration, which is explicitly required by many contracts, is another ADR method. Whereas a mediator does not decide for the parties, an arbitrator does. Arbitration can be binding or non-binding, depending on the contractual terms.
Perhaps the simplest solution to a breach is for the parties to negotiate their own resolution, which may or may not involve attorneys. This is an informal process that is especially valuable for parties that have worked together for a long time. The parties may agree to a contract modification, exchange of monetary payment or services, or another way to resolve the dispute and continue their business relationship.
How Our Business Team Helps Clients
Conducting business requires a multitude of comprehensive agreements and contracts that affect matters inside and outside your company. Our Business Team helps clients to review, revise, draft, and execute the following (among others):
- Non-compete agreements
- Non-solicitation agreements
- Lease and property agreements
- Licensing agreements
- Employment contracts
- Service contracts
- Vendor, supplier, and other third-party contracts
- Releases and waivers
To connect with our business team to learn more about a potential breach of contract or ways our guidance can help you: