Once the parties enter into a contract, they have to abide by the terms and provisions of the contract. If either party to the contract fails to perform the contractual obligation within the stipulated time, it would be considered as a breach of contract.
Types of Breach of Contract
Breach of contract can be of two types:
- By an express term of contract: In some contracts there are provisions explicitly conveying, that on default of certain events, it would be considered as a breach of contract. For example, if in an employment contract, serious misconduct is a ground for termination and if the employee commits any misconduct which is of grave nature, then it can be rightly said that such employee has breached the contract.
- By an implied term of contract: In some contracts the terms are not explicitly mentioned, rather it is implied. For example, the confidentiality clause in an employment contract. It is obvious for the employees to abide by the company’s confidentiality policy. If the employee leaks out any of the confidential information of the organisation, it can amount to breach of contract.
The Australian Consumer Law applies nationally. Generally the parties decide the terms of the contract. However, the law may imply terms into the contract. Despite the wording of a contract, there are some circumstances in which a Court might decide not to enforce its strict terms. For example, you may have rights under the Australian Consumer Law. This applies to contracts made from the beginning of 2011.
Once you make a contract you will be committing a breach if you do not comply with its terms, or if you change your mind and decide not to perform your side of the contract.
If a party breaches a contract there are a number of remedies available, including:
- Damages to compensate the innocent party for any loss suffered;
- A Court Order requiring the party who has breached the contract, to carry out his/her obligations;
- A Court Order forbidding the party from breaching the contract; and
- A Court Order declaring that the contract is at an end and requires the party who has breached the contract to put the innocent party in the position he/she was in before the contract was entered into.
The type of remedy and its availability would depend very much on the type of contract and the type of breach. Our Solicitor can advise you as to the best means of dealing with the problem.
Compensation & Settlement
Sue for specific performance
Court can Order for a specific performance thereby directing the party in default to specifically carry out obligations under a contract. When the damages awarded are not adequate to the compensation for the breach of a contract, the Court directs the parties to carry out specific performance. Such Orders are generally granted for contracts involving the sale of land or involving subject matter of a unique nature, such as a rare vintage car.
Obtain an injunction
When it is impossible to recover the damage caused due to breach of contract, Court can Order a person to restrain himself/herself from performing or repeating a wrongful act. Such Orders of the Court are referred as injunction.
Sue for damages
In the event of breach of contract the Court generally award damages in order to compensate the injured party for the loss suffered due to such breach. If, no substantial loss has been sustained by the injured party, then nominal damages may be awarded, recognising that a legal right has been infringed. There are two types of damages:
- Liquidated damages: If in a contract, it is explicitly mentioned that a particular amount needs to be rendered by the defaulting party in the event of breach of contract, then the amount rendered must either be liquidated or be penalty damages. Liquidated damages are nothing but an estimation of the amount which will compensate for the breach. In the event of a breach, the Court will award this amount as compensation.
- Unliquidated damages: When the contract is silent about the amount of damages to be awarded in the event of breach of contract, then the amount of damages will be a subject of decision of the Court.