Though courts tend to favour legal remedies for breach of contract, they also have the discretionary power to award equitable remedies. To fully understand the options available to you where legal damages are inadequate compensation, it’s necessary to understand the different equitable remedies available. This article walks you through different types of equitable remedies for breach of contract: specific performance, Injunctions, Declarations, Recission and Rectification, to give you a clear picture of the equitable remedies available.
What is ‘breach of contract’?
Before we explain the remedies for breach of contract, it is important to understand what actually constitutes a ‘breach of contract’. A contract can be breached where there is:
- Failure to perform the contractual terms
- Insufficient or sub-standard performance of contractual duties
- Delay or lack of payment
- Wrongful termination
- Wrongful assignation of obligations
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Equitable Remedies for Breach of Contract
The most common remedy for breach of contract are damages. However, depending on the context, damages may not be a satisfactory remedy. This is where equitable remedies may come in. Equitable remedies supplement the common law and are broad in scope, more adaptable, and direct in application. They’re also discretionary, meaning that it falls to the court to decide whether their application is appropriate.
In this section, we’ll briefly explain the equitable remedies for breach of contract that are available to you.
Note that the court may grant equitable remedies in addition to or instead of damages.
Specific Performance
Specific performance compels the party in breach to properly perform their contractual obligations. The court will take into account practical considerations such as whether performance of the contractual terms is actually possible, whether performance would be detrimental to them, and whether the innocent party has delayed unnecessarily in bringing the claim. A valid and enforceable contract is necessary for specific performance to be possible. Additionally, specific performance can actually be ordered before there has even been a breach. Typically, specific performance is most appropriate in disputes involving contracts for sale of land or sale of shares.
Note that specific performance will likely not be awarded if the contract in question relates to an ongoing performance of duties, employment or personal service (because ‘one individual cannot couple another to perform their duties against their will’ – Johnson v Shrewsbury).
Injunctive & Declaratory Relief
Injunctions are an equitable remedy where the court orders a party to either perform or abstain from performing a particular act. A prohibitory injunction orders a party not to do a particular act. By contrast, a mandatory injunction compels them to perform a specific act.
Courts can also order interim injunctions which are enforceable for a set period of time. Injunctions are discretionary remedies, the court typically orders them when they deem monetary damages insufficient. If the party in question violates the terms of the injunction they may be held in contempt of court.
A declaration ‘is a statement made by the court at the request of a party’. A declaration will clarify a principle of law or the parties’ rights in respect of the contract. This is a particularly effective means of pre-emptively resolving a dispute between parties.
Rescission & Rectification
Rectification corrects the mistake that has been made through a deed of rectification. This is used where although the contracting parties had a mutual understanding when writing the contract, their intentions were not accurately reflected in the final document.
Rescission aims to restore the contracting parties back into their pre-contractual position. Rescinding a contract is to extinguish it and is usually available as a remedy where there has been misrepresentation but not for breach of contract. Rescission is a retrospective remedy because it essentially cancels the contract so that it is as if it never existed and both parties (where possible) but ‘restore to the other any benefits received under the contract.’
It’s important to note, though, that if the dispute relates to Mistake then if the contract is ‘otherwise valid and enforceable on ordinary principles of contract law, it may not be possible to seek remission of it under the equitable jurisdiction.’
What Equitable Damages can the Court Award?
Equitable damages may be awarded in lieu or in addition to an injunction or specific performance. They can be available where the breach of contract is proven to be deliberate or intended to inflict harm on the claimant. Equitable damages intend to restore the claimant to their pre-breach position (Madden v Kevereski [1983]).
This kind of damages are available where the claimant has no cause of action and therefore cannot claim damages at common law. Equitable damages differ from common law damages because they can relate to the future. For example, they can be awarded in relation to an ‘injury which was threatened but [has] not yet occurred.’
Conclusion
Understanding the remedies available for breaches of contract can only take you so far. You also need legal representation that represent your interests and secure you the best outcome possible. Our first-class solicitors offer the expertise and experience necessary to best serve our clients. Get in touch today to find out how we can help.
FAQs about Equitable Remedies for Breach of Contract
1. What is an equitable remedy for breach of contract?
As we’ve seen, examples of equitable remedies for breach of contract include injunctions, specific performance, rescission, and rectification.
2. What happens if there is a breach of contract?
When one contracting party fails to fulfil their duties or goes against the terms under a legally binding agreement, this is breach of contract. The innocent party can bring a legal claim and may secure financial compensation, or if this alone is inadequate, equitable remedies as we’ve seen above.
* Disclaimer: The information is for general information only. This article is not legal advice and you should not treat it as such. We provide this information without any representations or warranties, express or implied. *