A broken contract can leave a Massachusetts business with unpaid bills, extra costs or lost income. State law offers several ways to recover these losses. These may include money damages or court orders. The remedy depends on the contract terms, the type of breach and the harm the business can prove.
What types of monetary damages apply?
Massachusetts courts generally award compensatory damages to place the injured party in the financial position they would have occupied if the contract had been fulfilled. Recoverable losses may include:
- Direct damages: Financial losses that result directly from the breach.
- Lost profits: Income the business expected to earn under the agreement.
- Added expenses: Reasonable costs caused by the other party’s failure to perform.
- Consequential damages: Other losses that were reasonably foreseeable when the parties made the contract.
Lost profits may be direct or consequential damages, depending on the facts. All claimed losses must meet legal standards for proof, including causation and reasonable certainty. The injured party must also take reasonable steps to reduce avoidable losses. Failure to do so may limit recovery.
Can a business seek equitable relief instead?
When money cannot fully address the harm, Massachusetts courts may consider other legal remedies. Specific performance may require a party to carry out its contract duties. Courts may use this remedy for unique property or goods that cannot be easily replaced. Rescission may cancel a contract in certain cases involving fraud, false statements about important facts, mutual mistakes or failure of consideration. Courts also review whether both parties can fairly return to their prior positions.
A preliminary injunction may stop harmful conduct while a case moves forward. Courts review the chance of success, the risk of harm that money cannot repair and the balance of harms. Permanent injunctions follow different rules after the court decides the claims. Certain employment noncompete agreements must meet Massachusetts General Laws chapter 149, § 24L. Other work restrictions may follow different laws.
What steps should follow a contract breach?
An injured party should review the agreement, preserve financial records and document losses. Reasonable efforts to limit further harm may also affect recovery. A Massachusetts business attorney can assess the contract, explain available remedies and determine whether financial damages or court-ordered relief may apply.