In business, a contract is a legally bindbinding agreement between two or more parties. A contract can be verbal or written, but it must include an offer, an acceptance of that offer, and consideration ( usually money) to make it enforceable. A ‘breach of contract’ occurs when one party doesn’t fulfill its obligations under the agreement.
There are four elements to a breach of contract:
1. The existence of a valid contract between the parties;
2. An obligation or duty arising out of that contract;
3. A breach of that obligation or duty by one of the parties; and,
4. Remedies for the breach by the party who has been damaged by the breach.
Generally, there are two types of remedies for a breach of contract: ‘specific performance’ and ‘damages.’ Specific performance is an order from a court ordering a party to perform its obligations under the contract. This remedy is generally only available in cases where damages would not suffice, such as when a unique item is purchased and cannot be replaced. Damages are monetary compensation for losses incurred as a result of the other party’s breach.
When assessing damages, courts will typically consider whether the breaching party acted reasonably to mitigate its losses – that is, whether it took steps to minimize harm caused by the breach. If the breaching party did not act reasonably, it may be required to pay ‘punitive damages,’ which are designed to punish