Contracts and Equitable Remedies

I spoke with a business owner the other day, and she asked what she could do when an agreement with another business went wrong.  I told her there are many options when a contract goes wrong and depends on the situation.  However, it is important to note that money damages is not the only remedy to a breach of contract.  In fact, a breach of contract can have more than one remedy applied at the end.  There are many types of remedies, and one category is equitable remedies. 

An equitable remedy is applied when compensatory damages are not enough or when there is no other remedy.  Sometimes, equitable remedies can only be applied when a legal remedy, such as compensation, is not available.  Here are a few equitable remedies: specific performance, contract rescission, contract reformation, and injunction. 

Specific performance is when a party is ordered to perform as promised in the original contract.  This remedy is rare because courts do not want to monitor what happens after the order.  It is also subject to several exceptions.  However, it can happen in circumstances where the original promise is something unique and one of a kind, such as a one-of-a-kind antique or property. 

Contract rescission is where the contract is cancelled by the court and the non-breaching party does not have to fulfill its responsibilities under the agreement.  This option can be available under some scenarios such as if the contract was the result of fraud, if one or both of the parties were mistaken about a material matter in the contract, or if the parties both agree to cancel. 

Contract reformation is exactly what it says: the contract is rewritten and changed.  There must be a valid contract in the first place, however.  The change makes the contract more like what the parties intended it to be.  This can be applied when one party was mistaken about a material term in the contract or is there was a misrepresentation of a term in the contract.  The reformed contract does not have to be a totally new one, and sometimes only a part of the contract is changed to reflect the parties’ intentions. 

An injunction is applied by a court and orders that a party either do or not do something because of harm.  This can be temporary or permanent.  A court’s goal is, generally, to keep the status quo or bring it back.  

It is important to keep in mind that there are multiple defenses to equitable remedies.  Two common ones are the doctrine of unclean hands and laches.  In the most basic explanation, a party attempting to attain an equitable remedy should not have breached the agreement itself and should not wait to bring a lawsuit until after monetary damages are available and damage the other party.

If you have a contract issue, need a contract reviewed, or have any concerns about an agreement, call an experienced attorney at Goosmann Law Firm in Sioux Falls, Sioux City, or Omaha today.