Your Rights When a Contract is Breached
A legally binding contract, whether written or verbal, establishes clear obligations that parties agree to fulfil. When one party fails to fulfil their agreed responsibilities, it constitutes a breach of contract. Understanding your rights and available remedies is crucial for protecting your business or personal interests.
This article outlines key principles of contract law in Australia and the steps you can take if a contract has been breached.
Terminating a Contract After Breach
Termination of a contract is not automatic following a breach. It must be legally justified and acting prematurely or without grounds can expose you to liability. You may be entitled to terminate a contract if:
- The contract expressly provides for termination in response to the type of breach that has occurred.
- The other party has repudiated the contract (i.e. they have clearly indicated they do not intend to perform their obligations such as refusing to deliver goods or abandoning a service).
- There is a breach of an essential term (a term so fundamental that its breach deprives you of the primary benefit of the contract).
- There is a serious or substantial breach that results in significant loss of benefit or renders continued performance unreasonable.
Important: Wrongful termination may itself be considered a breach of contract. Always seek legal advice before deciding to terminate.
Key Remedies for Breach of Contract
Several remedies are available under Australian law to address a breach of contract, depending on the nature and impact of the breach:
- Damages
Damages is monetary compensation which places you in the financial position you would have been in had the breach of contract not occurred. This includes:
- Compensatory damages for financial losses directly caused by the breach;
- Liquidated damages if the contract specifies a fixed amount payable upon breach, provided the amount is a genuine pre-estimate of loss and not a penalty
Courts now scrutinise liquidated damages clauses in standard-form contracts (especially those with consumers or small businesses) under the Unfair Contract Terms (UCT) scheme. Penalty clauses remain void and enforceable.
- Debt Recovery: If the breach involves unpaid amounts (e.g. overdue invoices, loan repayments), you may recover the debt through:
- Issuing a letter of demand
- Commencing court proceedings for recovery
- Enforcing payment through statutory demands, for corporate debtors.
Equitable Remedies
In some cases, monetary damages may be inadequate. Courts may grant equitable remedies, such as:
- Specific performance: A court order requiring the breaching party to carry out their contractual obligations (e.g. transferring property as agreed). This is generally not available for personal service contracts.
- Injunctions: A court order preventing a party from engaging in harmful conduct (e.g. breaching confidentiality or IP clauses).
Unfair Contract Terms
Unfair contract terms (UCT) in standard-form contracts are now illegal with consumers or small businesses, defined as having ≤100 employees or ≤$10 million turnover. Courts can impose significant penalties up to $50 million on corporations for failing to comply with the scheme.
Practical Steps for Breach of Contract
If you suspect a contract has been breached, we can help you take the right steps to strengthen your legal position, by:
- Reviewing the contract: Examine termination clauses, notice requirements, and dispute resolution procedures.
- Documenting the breach: Reviewing records of communications, missed obligations, financial loss, and timelines.
- Attempt resolution: Consider issuing a formal notice of breach, providing the other party an opportunity to remedy it. Alternative dispute resolution, such as mediation, may help avoid litigation.
- Providing legal advice: Before terminating or pursuing a remedy, obtain tailored legal advice to avoid risks and maximise your claim.
How Citilawyers Can Help
At Citilawyers, our experienced litigation and commercial lawyers provide strategic guidance for contractual disputes. We can assist with:
- Assessing the severity of a breach and advising on termination options
- Enforcing rights under the Unfair Contract Terms regime
- Pursuing damages or equitable remedies in court
- Recovering debts or negotiating settlements
- Advising on digital and service-based contract disputes
Need Legal Assistance with a Breach of Contract?
Whether you’re dealing with a breached agreement, unfair contract term, or unpaid debts, contact us for a consultation tailored to your specific contract circumstances. We are committed to helping you resolve the dispute and achieve a clear legal resolution.
