Running a business is challenging, even for the most prepared owners. Whether you have a small business or run a large corporation, you will need to enter into various contracts with employees, clients, vendors and other entities. If someone involved in those contracts breaks the contract, there are ramifications for doing so. Let's take a look at the penalties for breaching a contract.
There are two options that the party involved in a contract can use when the other party breaches the agreement. The two options include having the terms of the contract enforced in court or recovering compensation for the damages done by the breach of the contract.
One of the penalties is the cancellation of the contract and the payment of restitution. The nonbreaching party of the contract can cancel it due to the breach and then seek restitution from the party that breached the terms of the contract.
Specific performance is the other type of penalty that can be assessed to the breaching party of a contract. This is an option when monetary compensation is not the best legal remedy to a breach of contract. The nonbreaching party will request that the breaching party perform specific duties listed in the contract.
The most common penalty issued to the party that has breached a contract is that of payment of damages. These damages include punitive, compensatory, liquidated and nominal.
When a contract is illegally broken, or breached, the party that breaks the contract illegally can be penalized. It all depends on the severity of the breach and how much damage if left behind.