Contracts and Trade
Where a party to a contract has failed to honour
its contractual obligations, there are two types of remedies available to
the aggrieved party: damages and specific performance.
(i) Specific Performance
Specific Performance is a remedy, where, in certain
circumstances, a Court will order a party to a contract to perform as promised
under the contract. A Court will only order specific performance in favour
of an aggrieved party in exceptional cases, and where an award for damages
would not be adequate. With breach of land contracts, however, Specific
Performance is the preferred remedy.
(ii) Damages
More commonly, a party will seek damages, in the
form of monetary compensation, as a remedy for breach of contract. Damages
are an attempt by the Court to compensate the innocent party to the contract,
rather than to punish the party responsible for the breach. In rare cases,
however, Courts have granted aggravated and punitive damages for a breach
of contract. Damages are typically calculated in two ways:
- Diminution Value The
difference between what was contracted for and what was received is known
as the diminution value test. Implicit in the diminution value test is
a duty on the innocent party to mitigate its losses, or in other words
to take reasonable steps to prevent damages from inflating. For example,
assume X contracts with Y for the sale of pears for $ 50.00, to be delivered
on January 01. Y who receives the pears on January 10 is forced to purchase
pears elsewhere for $80.00. Damages are $30.00.
- Cost of Performance Method The costs to put the innocent contractual party in the
position it would have been in if the breaching party fully performed its
obligations is known as the cost of performance method. This method of
evaluation includes, the cost of fixing the defect, and of completing the
contract; this is the primary method used by the Courts involving building
contracts.
If you have any questions about damages pertaining
to a contractual matter, please feel free to contact us. After reviewing
a contract, and obtaining the circumstances surrounding an alleged breach
of contract, we can give you an opinion on the strengths of your legal claim,
and an estimation of the damage award to which you may be entitled.
Paradiso & Associates offers services in English,
Italian, & Portuguese.