Before commencing court proceedings for a breach of contract, it is essential that you consider the remedies available to you. A court can order damages, specific performance, and injunctions, however, an award of damages is more common.
Damages for breach of contract are compensatory in nature and are not awarded to punish the defendant. An award of damages compensates the plaintiff for their loss suffered, or in legal terms, to place the plaintiff in the same situation, in so far as money can do so as if the contract had been performed.
The party claiming the breach of contract (the plaintiff) must prove that they have suffered loss or damage as a result of the defendant’s breach. An award of damages cannot place the plaintiff in a better position than they would have been in had the contract been performed. The court can assess damages on several grounds.
If a plaintiff can prove that the defendant did, in fact, breach the contract, but is otherwise unable to establish their particular loss or damage, a court may award an order of nominal damages. For example, if Party A can prove that Party B has breached their contract, but is unable to prove what damage or loss, if any, they have suffered, the court makes an order that Party B pay Party A an amount of $1 in damages. The purpose of an award of nominal damages is to acknowledge that Party B has infringed Party A’s legal rights.
As the name suggests, a court may award expectation damages to a plaintiff to protect their expectation of receiving the defendant’s performance. This is the most common award of damages. Where there has been a promise to pay money, which has not occurred, an award of expectation damages is not an order that the defendant provides specific performance of the contract.
A court may also award a plaintiff reliance damages to recover expended money in performing a contract. The basis of the claim allows a plaintiff to recover money they have essentially wasted due to the defendant’s breach of the contract. Reliance damages will only be awarded in circumstances where expectation damages are inadequate or cannot be established. If a defendant can prove that a plaintiff would not have recovered their expenditure if the contract had in fact been performed, the court will not order an award of reliance damages. As discussed above, a plaintiff cannot be placed in a better position than they would have been in had the contract been performed.
A plaintiff may be entitled to restitution damages in circumstances where a contract is deemed to be unenforceable, but the plaintiff has already provided a benefit to the defendant, for example, part payment. Restitution damages are rarely ordered in Australia, as general damages are usually sufficient.
Whichever basis on which a court chooses to award damages, the underlying factor is that a plaintiff cannot be awarded an amount greater than the loss or damage that they have suffered as a result of the breach.
Are you a party to a contract that has been breached? If so, you should seek legal advice to determine your position. Get in touch with our disputes team on 1300 544 755.
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