Under Texas law, remedies for a breach could include:
- Financial compensation or "damages", such as actual, reliance, restitution and liquidated damages; and/or
- Non-monetary or "equitable remedies", such as asking the court to order the other party to fulfill their contractual duties.
Non-breaching parties may be entitled to a recovery of damages when the other party breaches their contract. Because damages are dependent on the individual facts of a contract, contracts must be evaluated to determine if they are available and what remedies are most appropriate. When recoverable damages are available, they may include:
- Actual damages – Actual damages are the monetary damages incurred as a result of a contract breach, such as lost revenue. This is known as your expectation damages and it refers to your financial position should the contract have been fulfilled. Expectation damages are measured by any diminution in value, as well as consequential and incidental damages.
- Reliance damages – Your reliance interest is a measurement for compensation when you suffer financial losses for relying on the party whose lack of contractual performance cost you money.
- Restitution damages – Restitution is awarded to restore you to the position where you were before the contract was formed and breached by the other party, and when you conferred a benefit with the expectation that they would perform. Restitution is calculated based on how much the breaching party gained.
- Quantum meruit – Quantum meruit refers to the recovery of the value of services performed which benefited the other party. The phrase is Latin for “as much as he deserved.”
- Liquidated damages – Liquidated damages are agreed upon during the formation of a contract, and entitles the non-breaching party to recovery for a specific breach. These are common in construction contracts where there is late performance.
- Specific performance – When monetary damages do not make a non-breaching party whole, the breaching party may be required to perform a specific duty, often the contractual duty that was originally agreed upon.
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.” 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.
When you work with Hendershot Cowart P.C., you work with our entire legal team. Our clients are backed by attorneys with more than 100 years of combined legal experience in Texas contract law, business fraud, and other types of business disputes. We are very familiar with what it takes to win a breach of contract lawsuit. We are here to guide you every step of the way – whether the contract dispute is resolved through mediation, arbitration, or litigation.
Our contract law attorneys also specialize in drafting, reviewing, and negotiating business agreements and contracts, handling thousands of such matters each year.
There is no one strategy to win a breach of contract claim; every case is different. There are, however, a few critical steps to take to make sure your contracts are enforceable and your rights are protected. If your contract is breached and you are forced to bring legal action, these steps will help protect your interests:
- A clear, detailed contract. A carefully crafted, unambiguous contract is a significant step in being clear about the duties and responsibilities of each party. Make sure the terms are very clearly defined, and that they are customized to your situation. Don’t simply turn to the internet and find a form to do it. They are not tailored to your particular needs and many times are unenforceable or cause more harm than good.
- Negotiations. Establishing ground rules, such as in the event of a disagreement and how it should be resolved, is important when negotiating the contract. This includes a full assessment of where a dispute will be resolved, what laws will apply, recoverable damages, legal definitions, and more.
- Documented performance. Performance is a critical aspect while a contract is being fulfilled. If you are on the side contractually obligated to perform, document what you are doing and that you have fulfilled your contractual duty. If you are on the other side, also document any problems with performance, as you will need to insist on performance when the other party is consistently performing under the contract. This creates favorable evidence.
- Evidence. Evidence needs to be truthful, and it should always be preserved. Evidence will be important to demonstrating that one side performed in accordance to a contract, while the other did not.
- Witnesses. Successful cases require someone who has seen, and can speak from firsthand experience, relevant facts related to the breach of contract. This can include expert witnesses, or individuals who had direct or indirect involvement. Witnesses will also need to be evaluated to ensure they are as credible as possible.
- Timeliness. The statute of limitations, or the time in which a claim must be brought before it will be barred by law, will run when the start of the action accrues; the time when you knew or should have known there was a breach of the contract. In Texas, that statute of limitations is 4 years.
Many of the same steps apply for defendants who have been accused of breaching a contract. There are also many affirmative defenses, including ambiguous contracts, mutual mistakes due to a lack of clearly defined conditions, being fraudulently induced into a contract, or estoppel, which prevents plaintiffs from making claims that go against their prior positions. A plaintiff may be stopped when they don’t address the defendant performing under the contract prior to court.