commercial & contracts bodenheimer herzberg legal

Whether a party is in breach of contract and if so, what will be the counterparty’s remedies, is first and foremost a matter of the contract in question:

  • The parties are, for instance, free to agree that certain immaterial discrepancies (e.g., of the quantity of goods delivered, in a sales contract) shall not be considered breaches but shall simply give rise to purchase price adjustments.
  • Further, the parties may, and often do agree that before any other remedies may be resorted to, the aggrieved party must first give the party in breach the opportunity to cure the breach within a defined time period.
  • Finally, the parties may limit or expand the remedies foreseen by the otherwise applicable legal framework. They may, for instance, exclude or limit damages.

The parties’ freedom of contract may be restricted due, among other reasons, to the regime on General Terms and Conditions.

To the extent that statutory provisions apply and have not been validly derogated by the parties, typical remedies for breaches, depending on the jurisdiction and the type of contract are:

  • price reduction,
  • damages,
  • avoidance.

To quantify damages, multiple methods are available, depending, again, on the jurisdiction, the type of transaction in question, and the type of breach. The quantification of damages may be estimated by, amongst others, the following methods:

  • Loss of profit,
  • Wasted costs,
  • Changes in fixed costs,
  • Accrued interest.

Some jurisdictions also allow for the disgorgements of profits gained by the party in breach. This remedy is called “account for profits” and may, depending on the jurisdiction in question, technically not constitute a claim to damages but a claim based on unjust enrichment, restitution, constructive trust, or some such device.

Additionally, nominal damages, exemplary damages, or punitive damages may be available in certain jurisdictions.