Having the right contract is always a good idea, but no matter how much protection it offers, no contract can prevent a breach of contract by the other party.
If you enter into a contract and it is breached, there are several possible remedies available to you. Breaches of contract occur when one party refuses to perform their obligations under the contract or performs them defectively.
If the other party breaches a condition of the contract, you may be able to 'repudiate' the contract to terminate it and claim damages for your loss - or to 'affirm' the contract and claim damages. When the breach of contract is the breach of a warranty in the contract, the restitution is by damages alone.
If the contract specifies the amount to be paid if the other side breaks the contract, you will be entitled to what are termed 'liquidated damages'. This type of clause is most often found in the manufacturing and building industries, where penalty clauses for late completion are common.
Damages are essentially of two types and are intended to restore the claimant to the position they would have been in had the contract been performed satisfactorily. In the UK there is no concept of 'punishment' in damages, so the settlements reflect the actual loss only.
General damages are awarded for unquantifiable losses, such as loss of amenity, physical inconvenience and so on. Special damages are awarded for quantifiable losses, such as loss of profits.
In order to sue successfully for damages arising out of a breach of contract, you must demonstrate that there was a contract in existence, that the other side failed to perform their part of the bargain satisfactorily and that you suffered a loss as a result. You are also expected to take reasonable steps to reduce the impact of the breach i.e. to 'mitigate your loss'.
Under English law, in a court action for damages the loser normally pays the costs of both parties and most cases settle before they get to court. More recently, it has become possible to undertake litigation on a 'no win, no fee' basis for many types of action.
A less commonly used remedy is ‘specific performance’ – where one party goes to court to obtain an order of the court that the other party will specifically carry out their contractual obligations.