In the course of doing business, companies and customers will find themselves inevitably working with an unscrupulous individual or making a mistake themselves. Such circumstances can lead to a breach of contract.
When one party does not fulfill the terms of an agreement, various types of damages may be available to the injured party.
Compensatory Damages
Compensatory damages provide restitution for a party that suffers losses due to a contract breach. Such payments are to make the injured party whole again.
Consequential damages reimburse an entity for indirect damages because of failure to fulfill a contract. For example, a company may lose money because a contractor does not complete a project on time, causing the business to delay its opening. Then the contractor may have to pay consequential damages. The loss must have been reasonably foreseeable at the time of contracting.
Expectation damages cover a loss that results from a party not obtaining a promised item in a contract and is designed to put the nonbreaching party in a position as if the breach had not occurred.
Liquidation Damages
A contract can state liquidation damages that both parties agree to for circumstances where consequential damages may be difficult to foresee and calculate. In the case of the contractor who finishes a project late, the agreement may dictate the contractor pay a fee for every day the project is late.
However, Florida law states that such damages must be reasonable. The state voids unreasonable liquidated damages as a penalty.
Equitable Remedies
If money cannot satisfy a claim for damages, equitable remedies may be necessary. A court may order the party that breached the contract to fulfill some duty. The court might also require the parties to rewrite the original contract or draw up another.
Disagreements and mistakes will happen in business. Companies can understand and prepare for the possible damages that may result as a consequence.
