Legal Consequences for a Breach of Contract

Entering a legal contract requires individuals to execute or refrain from performing specified actions. When these actions are not carried out, then a breach of contract may exist. Understanding the legal consequences will help Phoenix business parties make informed decisions and prevent costly errors.

Legal Consequences

Legal consequences for an Arizona breach of contract will generally involve monetary damages and may be referred to as compensatory damages. These damages compensate the party harmed by the violation and aim to restore them to where they should have been monetarily if the breach had not occurred. Measuring legal damages occurs in three ways.

Expectation Damages

It is not uncommon for one of the parties of a binding contract to suffer financially if a breach of contract occurs. Expectation damages serve to compensate the harmed party for the losses they suffered. The courts will determine if a contract was binding and a breach occurred, and the appropriate compensation.

Monetary or remedy damages may be awarded. The court can also decide the terms of the contract must be upheld, known as specific performance. Expectation damages compensate the harmed party for any losses and aim to place them in the financial position they should have been in if the contract had not been broken.

A reasonable calculation of the expected damages must occur to award them, but it can sometimes be challenging. When this cannot be calculated, nominal damages can be awarded, which proves that the harmed party’s legal rights have been violated but does not compensate for a monetary loss.

Reliance Damages

Reliance damages serve to compensate one party for relying on another’s promise, which is unenforceable. These damages restore the party to their original monetary standing had the contract never been made.

For example, you want to buy business equipment that costs $30,000. A business acquaintance or partner agrees to give you the $30,000, so you take $20,000 of your money and put it toward the equipment. For unknown reasons, the acquaintance does not fulfill the agreement to give you the $30,000.

The breach is taken to court, and you are awarded damages. The acquaintance or partner will be responsible for reimbursing you the $20,000, returning you to the financial state you previously had before the agreement.

Restitution Damages

These damages require any person benefitting at the expense of another to restore in whole the amount they gained by repaying them. The court awards these types of damages to prevent unjust enrichment or to prevent the reward to someone for their dishonesty.

Restitution damages differ from expectation and reliance damages in that they do not compensate one party for what they lost. It highlights what the other party in the contract gains.

Some factors used to determine restitution include:

  • The Market value of the benefit
  • Any expense to the individual that did not benefit from the gains
  • The advantage the gains would have been to an individual

Restitution is a common form of reimbursement for damages and is an effective form of compensation due to a breach of contract.

Phoenix Breach of Contract Attorney

Breach of contract is common and can be costly. The Law Offices of William D. Black has assisted clients in creating businesses and fought beside them through legal challenges. Over thirty years of legal navigation through business and commercial law has proven that William D. Black is a trusted source in business and resolution in the legal consequences of breach of contract.