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contracts & trade
Enforce Your Agreement
Where a party to contracts 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, to be delivered on January 1. Y, who receives the pears on January 10, is forced to purchase pears elsewhere for $80. Damages are $30.
- 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.
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