Once a contract has been entered into it is the obligation of each party to ensure they deliver on what they agreed. If they fail to do that they may be liable for any damages that the other party suffers due to them not fulfilling the contract.
This will mean that they need to complete their contractual obligations with regard to performance for the discharge of the contract. If a party fails to complete the contract there are a number of options open to the other party and these will depend on the reason and circumstance that the this party failed to deliver performance. As a general rule: Where a contract has been substantially performed then payment for any work done will be payable with a deduction for the work which wasn’t done. Consequently if a contractor was able to complete the service installations for 9 houses when the contract specified 10 then 90% of the contract fee would be payable.
In certain instances a contract may be frustrated. This is the Legal termination of a contract due to unforeseen circumstances. This can prevent the objectives of the contract being achieved; render its performance illegal; or make it practically impossible to execute. It could be caused by reasons such as an accident, change in the law, fire, third-party interference. Frustration of a contract excuses non-performance and automatically discharges the contract except where the terms of contract override this implied legal provision. However, frustration is not acceptable as an excuse where the circumstance was foreseeable.
If we return to our case above where a contractor only installed the services for 9 out of the 10 houses, if one of the houses had been destroyed by fire before services could be installed then the contract is frustrated. More details on this can be obtained from the website below.
Breach of Contract
If one of the parties to a contract fails to deliver that which they had agreed to deliver in the contract then they are in breach of the contract. As mentioned previously this can relate to time and quality although in construction industry it is common for defective work to be completed, this would not in fact be a breach providing any faulty work was rectified within a specified time. It would be a breach if the contractor refused to rectify the faults or it was not done within the time that the contract required the work to have been complete. If there is a breach of a contract and a party fails to meet their responsibilities it is open for the other party to seek redress: This can be done in a number of ways.
Remedies for Breach
A number of remedies are available for breaches of contract where the injured party takes the matter to the courts, (the Plaintiff) and looks for a remedy from the other part (the Defendant) these remedies are:
- Compensatory Damages - money to reimburse the plaintiff for costs and compensate for any loss.
- Consequential and Incidental Damages – this is money for losses caused by the breach that were foreseeable. Foreseeable damages means that each side reasonably knew that, at the time of the contract, there would be potential losses if there was a breach.
- Liquidated damages (also referred to as liquidated and ascertained damages) are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late performance).
- Specific Performance – is a court order requiring performance exactly as specified in the contract.
- Punitive Damages - Damages awarded to a plaintiff that are meant to punish the defendant for anti-social actions rather than reimburse the plaintiff for loss.
- Rescission - the contract is cancelled and both sides are excused from further performance and any money advanced is returned.
- Reformation - the terms of the contract are changed to reflect what the parties actually intended.
Wherever possible the parties should endeavour to negotiate a settlement for a breach rather than take the matter through the courts. Other alternatives for dispute resolution include mediation and arbitration, which are generally more cost effective than resorting to court action.
More details relating to Breach and the remedies are available from the website listed below.