Oh-No! Breach of Contract!

We were recently asked: what happens when a party breaches the contract? 

Well…

There are two types of contracts: a contract for the sale of goods and a contract for services.  For the most part, the remedies available for breach of contract for either a sale of goods or for serves are the same, but there are also some differences.  When there’s a breach of contract for the sale of goods, the UCC governs.  Under the UCC, failure to deliver goods is a material breach, but in common law, it is not.  Any contract can contain a “liquidated damages” provision which typically includes a certain amount of money that the non-breaching party is entitled to if a party breaches the contract.  In the event the contract you entered into does not have such a provision, the following remedies may be applicable:

Breach of contract for services:

  • Expectation damages—money equivalent for the loss of the benefit of the bargain
  • Reliance damages—put the non-breaching party in the pre-contract position (before the contract occurred)
  • Restitution damages—prevents unjust enrichment and puts the breaching party in the pre-contract position

Breach of contract for sale of goods:

  • Under the UCC, there’s the Perfect Tender Rule, which provides that if the goods or tender of delivery fail to conform to the contract, the buyer may:
    1. Reject the whole;
    2. Accept the whole; or
    3. Accept any commercial unit or units and reject the rest.
  • If the Seller breaches, the Buyer can:
    1. Cover—buy substitute goods and get the difference between what the buyer paid and what the buyer was supposed to pay under the contract;
    2. Specific performance—if the goods are unique (rare, not easily replaced) or in other proper circumstances; or
    3. Do nothing and sue for market damages—the difference between the market price and the contract price.
  • If the Buyer breaches, the Seller can:
    1. Re-sell and seek damages;
    2. Recover from the Buyer the difference between the contract price and the resale price; or
    3. Recover under the lost profit measure

How do you know if there has been a breach?

  • There is an enforceable contract between the parties,
  • Defendant breached the contract, and
  • Plaintiff (non-breaching party) was damaged.

If you have entered into a contract and the other party has breached or you think there has been a breach, schedule a consultation with the experienced attorneys at EPGD Business Law today, located in beautiful Coral Gables. Call us at (786) 837-6787 or e-mail us to schedule a consultation.