When can you claim damages for breach of contract?
Compensation for breach of contract can be claimed after a contract existed between the parties, and one of the parties to the contract breached it, and caused damage to the opposing partyIn the absence of damage, the court will not award damages for breach of contract, except in a situation where the contract contains agreed compensation or Compensation without proof of damage.
A contract between the parties is usually made in writing but can also be Oral contract It is a contract for all intents and purposes, as long as one manages to prove in the event of a dispute what the terms of the contract were and what each party undertook (this can be done by recording a conversation or by witnesses who were present when the parties to the oral contract reached their agreements). Not every issue can be covered by an oral contract. In real estate transactions, the contract must be made in writing.
It is important to note that in no case can compensation be claimed for breach of contract, because in most written contracts it is customary to allow a delay in performing an action or making a payment for 7 days, without this constituting a breach of the contract and without the other party being able to claim that they are entitled to any compensation (this is very common in apartment sale/purchase contracts and you should be aware of this before considering Lawsuit against apartment seller for breach of contract).
Another important thing to note is whether the contract requires the fulfillment of a number of conditions, so if these conditions were not met, it may not be possible to claim that the contract was breached. For example: If the contract states that one party to the contract must pay the other party one million shekels by a certain date, and the party that is required to pay has only paid half a million shekels but the date specified in the contract has not yet passed, it cannot be claimed that the contract was breached. Breach of contract, because the relevant date has not yet passed.
Many contracts also have a clause that talks about Agreed compensation. These clauses are very common in apartment purchase transactions between a contractor and an apartment buyer or between two private individuals who buy/sell an apartment to each other. What this clause stipulates is an agreed compensation for both parties in the event of non-fulfillment of the contract or in the event of a delay in fulfilling the contract. The agreed compensation can be a fixed amount or a fixed amount multiplied by the number of days of delay or a certain percentage of the transaction value.
In most cases, you can claim the agreed compensation in addition to additional amounts of money for damages you suffered. For example: If You received an apartment you purchased from a contractor late. You can usually demand the agreed compensation and compensation for additional damages you suffered, such as payment of rent you paid until the apartment you purchased was actually delivered to you.
Different types of damages for breach of contract
When you intend to claim damages for breach of contract, you need to be familiar with the different types of damages that you can claim. There are two types of damages:
- Reliance compensation.
- Subsistence compensation.
Usually, a court will not award both summary damages and subsistence damages for fear of double compensation.
Reliance compensation
Reliance damages are damages intended to compensate the injured party and restore him to the situation prior to the signing of the agreement.
For example: A person is interested in purchasing a large company and to do so, he hires an accounting firm to review the company's financial data. The buyer paid a million shekels for the accounting firm's services. Ultimately, the seller breached the contract and the company was not transferred to the buyer.
In such a situation, reliance damages are the same million shekels that the buyer paid to the accounting firm for its services.
Subsistence allowance
Subsistence damages are damages that aim to put the injured party in a position as if the contract had been fulfilled, and not violated.
For example: A seller has undertaken to sell a buyer goods worth two million shekels. The buyer has only paid 500 thousand shekels and has not paid the balance. The seller may demand damages for breach of contract in the amount of one and a half million shekels, and they will be considered compensatory damages because they will put the seller in the position he would have been in if the contract had been fulfilled by the buyer.
On what basis can compensation be claimed for breach of contract?
To claim damages for breach of contract, it is very useful to be familiar with the provisions Contract Law (Remedies for Breach of Contract)It is the Contract Law that allows a person injured due to a breach of contract to claim compensation and other important remedies. Section 2 of this law states:
If a contract is breached, the injured party is entitled to demand its enforcement or to cancel the contract, And he is entitled to compensation., in addition to or in place of one of the aforementioned medications, all according to the provisions of this law.
That is, by virtue of Section 2 of the Contracts Law, the person injured by the breach of a contract may demand three remedies:
- Contract cancellation.
- Contract enforcement.
- Financial compensation.
It is possible to demand cancellation of a contract or enforcement of a contract together with monetary compensation, but it is not possible to demand both enforcement of a contract and cancellation of a contract because these are conflicting remedies.
The Contracts Law also includes a dedicated chapter on the subject of monetary compensation (sections 10-16). This chapter states as follows:
The right to compensation 10. The injured party is entitled to compensation for the damage caused to him due to the breach and its consequences, which the violator foresaw or should have foreseen, at the time of concluding the contract, as a probable consequence of the breach.
Compensation without proof of damage 11. (a) If an obligation to provide or receive an asset or service is breached and the contract is terminated due to the breach, the injured party is entitled, without proof of damage, to compensation in the amount of the difference between the consideration for the asset or service under the contract and the value on the date of termination of the contract.
(ב) הופר חיוב לשלם סכום כסף, זכאי הנפגע, ללא הוכחת נזק, לפיצויים בסכום הריבית השקלית כהגדרתה בחוק פסיקת ריבית והצמדה, התשכ"א-1961 על התשלום שבפיגור, מיום ההפרה ועד יום התשלום, אם לא קבע בית המשפט שיעור אחר, ויחולו הוראות החוק האמור לעניין ריבית זו, בשינויים המחויבים.
Reservation of right 12. The provisions of section 11 do not derogate from the injured party's right to compensation for damage he has proven under section 10; however, if the consideration for the breached obligation was unreasonable, or there was no consideration at all, the court may reduce the compensation to the extent of the provisions of section 11.
Compensation for non-pecuniary damage 13. Caused a breach of contract Damage other than financial damageThe court may award compensation for this damage in a rate it deems appropriate in the circumstances of the case.
Harm reduction 14. (a) The violator is not liable for damages under sections 10, 12 and 13 for damage that the injured party could, by reasonable means, have prevented or reduced.
(b) If the injured party incurred reasonable expenses to prevent or reduce the damage, or undertook reasonable obligations to that end, the violator is obliged to indemnify him for them, whether or not the damage was avoided or reduced; if the expenses or obligations were unreasonable, the violator is obliged to indemnify him to the extent of their reasonable amount in the circumstances of the case.
Agreed compensation 15. (a) If the parties have agreed in advance on a rate of damages (hereinafter – agreed damages), the damages will be as agreed, without proof of damage; however, the court may reduce them if it finds that the damages were determined without any reasonable relationship to the damage that could have been foreseen at the time of the conclusion of the contract as a probable result of the breach.
(b) An agreement on agreed compensation does not in itself derogate from the right of the injured party to claim compensation in their place under sections 10 to 14 or derogate from any other remedy for breach of contract.
(c) For the purposes of this Article, amounts that the violator paid to the injured party prior to the breach of contract and the parties agreed in advance on their forfeiture in favor of the injured party, are treated as agreed damages.
Compensation and insurance 16. In determining the rate of compensation, no amount that the injured party received or is entitled to receive due to the breach of contract shall be taken into account. Insurance contract.
What to do to actually receive compensation for breach of contract?
After a breach of contract, no one will volunteer to pay you compensation. The higher the amount of compensation, the more likely it is that you will have no choice but to file a lawsuit. Claim for breach of contract To court and conduct a lengthy legal process, during which you will have to convince the court that you suffered damages as a result of the breach of contract, and that the person who breached the contract must pay you compensation for the damages he caused you.
Before you rush to submit Claim to court and demand damages for breach of contract, it is very advisable to send first Warning letter before taking legal actionAs part of this warning letter, you must detail the circumstances for which you are demanding compensation for breach of contract, but it is important to remember that a warning letter is not a statement of claim and therefore does not need to be as detailed as a statement of claim.
You should allow the other party to respond to the letter within a reasonable time. Under no circumstances should you file a claim the day after sending the warning letter, as this will be considered For dishonest behavior And maybe even Abuse of legal proceedingsIt is generally accepted to allow a response within a period of time ranging from 7 to 21 days (depending on the circumstances and the urgency of the matter).
If the violator does not respond to the letter or does not pay you compensation for breach of contract after sending the letter, it is time to contact a lawyer who deals with contract matters to prepare and file a lawsuit with the court on your behalf.
In preparation for filing the lawsuit, it is very useful to prepare in advance all the evidence you have that proves that the opposing party violated the contract and caused you damages (correspondence, recordings of conversations, documents, witnesses, etc.).
You can read. Sample claim for breach of contract Published on the website to understand how to draft a claim for breach of contract.
In conclusion
In order to receive compensation for breach of contract, it must be shown that a contract existed between the parties, that the contract was breached, and that the breacher caused damage to the other party.
In addition to compensation for breach of contract, additional remedies may be sought, such as cancellation of a contract or its enforcement, but both cancellation of the contract and enforcement of the contract may not be sought.
The injured party may demand reliance damages or subsistence damages. The court will usually not grant a request to receive both reliance damages and subsistence damages for fear of double compensation.
The higher the amount of compensation for breach of contract, the greater the chances that there will be no escape from taking legal action in court (no one volunteers to pay large amounts of compensation without legal action).
