3 non-financial remedies for a contract dispute

| Jul 7, 2020 | Business Litigation |

In an ideal world, parties entering a contract fulfill their obligations to the mutual benefit of each. Unfortunately, all too often one party fails to deliver promised products or services in accordance with the written agreement and the United States Uniform Commercial Code. That can lead to both loss of revenue and loss of standing with clients or customers.

When a breach of contract occurs, the non-breaching party may choose to pursue legal damages in the form of monetary compensation. However, under some circumstances, a mere financial solution is not enough to remedy a contractual fault. Also known as “injunctive relief,” equitable remedies provide another option for businesses seeking to redress a breach of contract.

1. Specific performance enforcement

In some circumstances, compensatory damages may be inadequate to restore the position of the non-breaching party. In cases where the subject of the contract is unique or difficult to acquire elsewhere, the court may order the breaching party to carry out the terms of the agreement as originally written.

Known as a specific performance order, this contractual remedy is most common in transactions that involve real estate purchases, unique service contracts and rare goods, such as artwork or antiquities.

2. Rescission

A rescission of contract effectively unmakes the agreement between the parties, rendering the contract null and void. A rescission may be mutual if contracting parties agree to discharge remaining obligations without conflict over damages or other issues.

However, in many cases, the non-breaching party may pursue rescission unilaterally. The court may approve unilateral cancellation of a contract under a variety of circumstances that may render the original contract invalid, including fraud, material misrepresentation, undue influence or duress, and breach of fiduciary duty.

3. Reformation

If one or both contractual parties find that the written contract does not reflect the agreement’s original intentions, the court may allow the parties to rewrite the faulty portion of the contract.

Reformation may occur under mutual agreement in cases where both parties have overlooked a mistake or ambiguity in the written document. It may also be an appropriate remedy when only one party has misled the other, whether intentionally or unintentionally.