Contracts are binding legal agreements between two or more parties, but contracts are also broken every single day in New Jersey. If the other party to your contract fails to perform its obligations, they have “breached” the contract, which is the legal term for breaking the agreement.
New Jersey’s courts are open for those with breach of contract claims. The primary remedy for a contract breach is a sum of money called “damages.” Below, we list the different types of damages you might receive.
Expectation damages are meant to replace what the non-breaching party had expected to obtain from the contract but didn’t because of the breach. For example, you might have signed an employment contract for one year, expecting to receive an $80,000 salary. If you were fired for no reason after 1 day, then you have lost out on the $80,000 that you expected to receive.
Every non-breaching party has a duty to mitigate its damages. In the employment context, this means finding another job. Nevertheless, you can then sue to receive to the full value of what you were promised under the contract.
Let’s say you quickly get another job which only pays $50,000, so your expectation damages would be about $30,000. This is the amount that would put you in the position you would be in had the contract not been breached.
If you spent money in expectation of a contract being fulfilled, then you could receive reliance damages where expectation damages are inadequate. Reliance damages are sometimes available where you were able to fully mitigate your damages but made investments in equipment or supplies for a specific client.
For example, you might have agreed to paint someone’s house for $5,000 and immediately bought paint.
When the homeowner breaks the contract, you quickly find a new client who wants their house painted. But you can’t use the paint you already bought since the new client wants a different color, so you should be reimbursed for your wasted expenses.
Some contracts contain a liquidated damages provision. Basically, liquidated damages are a predetermined sum of money that the parties agree to pay in the event of a breach. Often, parties use liquidated damages when it is hard to forecast or calculate the losses caused when a contract is broken.
However, liquidated damages cannot be a penalty for breaching. Instead, they must be reasonable, even if both parties agreed to them in the contract.
A party that breaches shouldn’t reap a windfall because they broke a contract. Restitution damages help to prevent this. In this way, they differ from expectation damages because they are not meant to put the non-breaching party in the position she would be in had the contract been executed. Instead, they focus on depriving the breaching party of a benefit they do not deserve.
Restitution damages are rare. However, they might make sense if you suffered little economic loss when the other party breached the contract.
Contact a Seasoned New Jersey Breach of Contract Attorney
The Sattiraju & Tharney, LLP is one of the leading employment law firms in New Jersey, and we have handled many employment contract disputes. If you believe another party has breached a contract, you should consider your options, including how much you can receive in compensation.
Please contact us today by scheduling a consultation with one of our attorneys.