Posted on the 16th February 2016

compensation for breach of contract

Unfortunately, disputes over contracts occur all too frequently in business life: sometimes the only option is to seek compensation for breach of contract via a legal route. The good news is that when it comes to disagreements over contracts, there is often a way to minimise the costs and risks of litigation by the use of third party litigation funding, after-the-event (ATE) legal expenses insurance and conditional fee agreements (CFAs – sometimes referred to as ‘no-win no-fee’ agreements). However, in order to have access to the best risk management tools, you first need to understand your case.

Entering into a contract is the first step in protecting your rights, against the other party not fulfilling their obligations to you as part of any business relationship. With this in mind, when seeking compensation for breach of contract, it is always best to seek professional advice, to ensure clarity of language and meaning, and that the dispute resolution process is not open to mis-interpretation.

In the event, good breach of contract solicitors will help you respond appropriately – you must be careful. You may believe that the breach allows you to terminate the contract and seek damages, but that may not be the case. Parties often believe that as the victims of another’s breach they are in a position to claim for the full value of any contractual or consequential losses incurred. In reality though, the courts would expect you to attempt to mitigate your losses where possible; seeking compensation for breach of contract may weaken your claim Taking early professional advice will ensure you don’t make any wrong turns that could undermine your claim, or reduce the claim value: If you fail to act quickly you may miss your opportunity, but if you act in haste there is every chance you will damage your own case. Tread carefully.

Assessing a breach of contract claim

Before thinking about breach of contract remedies , the first step is to look at the facts, and this will start with the contract itself: is the contract in writing, was it signed and what does it say? Have there been revisions since, and are they formally recorded or were they via email, for example? Will the contract be upheld in law, or could it be undermined by statute (such as in a business to consumer relationship)? What was the nature of the contractual breach (is it fundamental, affecting the heart of the agreement)?

How much is my case worth?

Appropriate compensation for breach of contract is affected by a number of factors. Courts will look at compensatory breach of contract damages for losses suffered as a direct result of the breach, but they can also look at whether your opponent has profited from the breach. If they have then the courts can award those profits to the victim of the breach, as another way of compensating (if the original damages were not deemed sufficient).

If there are no significant financial losses, the court may instead award a nominal figure and also cover the legal costs of the claimant. If necessary, non-financial damages can also be considered, such as for distress or inconvenience.

Of course, a contract may include a specific clause on liquidated damages. If this is the case then the clause should be a genuine pre-estimate of loss, with the purpose of the clause being compensatory rather than a deterrent. Liquidated damages can be used alongside default interest provisions to provide a contractual sanction against non-payment, with the benefit being a level of certainty from the outset.

Annecto Legal can connect you to specialist breach of contract solicitors . Visit our breach of contract page today or get in touch with our experts to find out how you can make the most of our litigation funding solutions.