The best way to avoid a business dispute is through binding and legally enforceable contracts. But what happens when the other party fails to keep their end of the bargain?
A contract is “breached’ when a partner, vendor, or third party acts unlawfully, violates the terms of a contract, or fails to perform any promise contained in the binding and legally enforceable contract. Texas law allows parties who prevail in breach of contract claims to be “made whole,” which usually means monetary payment in the form of damages.
What if money damages alone can't make things right? In that case, you may be entitled to an what is known as an “equitable remedy.”
What Are the Equitable Remedies Available for Breach of Contract in Texas?
In Texas, in addition to suing for financial damages, there are four available equitable remedies for breach of contract disputes:
- Rescission. Rescission is an agreement to void the contract and return both parties to the position they were in prior to the agreement. When the court grants rescission as a remedy, the contract and the parties’ rights and liabilities under it are cancelled, and any money exchanged must be returned. This remedy for breach of contract is not available if substantial performance on the contractual obligations have already been completed by one party or another.
- Specific Performance. Another option is to go to court and ask for specific performance, namely ask the court to order the breaching party to do everything that was promised. A court will not order specific performance as a remedy for breach of contract unless it can effectively oversee compliance with the order. For example, a court will not likely order a party to perform a series of activities over an extended period.
- Reformation. Reformation is essentially agreeing to a different deal. If one party breaches the contract, the other party is no longer bound by the agreement. But they wouldn't have entered into the agreement in the first place if they didn't have mutual interests. Reformation allows the contract to be tweaked or "re-formed" so that both parties want to comply with the terms. It’s a way of clarifying a contract that was based on a misunderstanding, a mistake, or one party's failure to disclose all the relevant information.
- Injunction. An injunction is a court order that tells a party either to do something or refrain from an action that would be harmful. This remedy is a way of maintaining, or restoring, the status quo.