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22 BUSINESS THROUGH INNOVATION LEGAL BTREACH OF CONTRACT: DAMAGES AND OTHER RESOLUTIONS hrough the course of operating Available options an opportunity to profit, the courts may a pharmacy business, you’ll be The courts may make orders to resolve award damages for loss of chance. required to enter into a wide contractual disputes, including orders that: When assessing potential damages in range of contracts. These may • The offending party is forbidden from this regard, it’s important to consider the come in several forms, including: breaching the contract. This is known likelihood that you would have received • Supply agreements for stock. • Leases for your shop premises. • Employment contracts with your staff. Contracts By definition, a contract is a binding agreement between parties that will govern their relationship and will set out what they are (and aren’t) permitted to do. In a perfect world, people would always respect the obligations placed on them by a contract. However, this is not always the case and it’s likely that, at some point, you’ll be faced with a situation in which someone breaches the terms of an agreement made with you. Many contracts will stipulate remedies and damages that will be payable in certain situations. These are known as ‘liquidated damages’. However, when a contract doesn’t state or quantify what the offending party must do to rectify their breach of contract, this will have to be determined mutually by the parties, or by the courts. Alternative dispute resolution When dealing with situations of this nature, it’s generally preferable to settle the dispute outside of the courtroom. Litigation is often an expensive process and avoiding it can save both parties a considerable amount of time and money. For this reason, we usually advise that you engage in genuine negotiations with the other party. If these initial negotiations break down, you may also wish to consider the use of a mediator. However, in some circumstances these alternative dispute resolution methods will be unable to resolve the dispute satisfactorily and you may wish to enforce your rights through the courts. as an ‘injunction’. • The offending party must carry out the obligations imposed on them by the contract. This is known as ‘specific performance’. • The contract be terminated, with the offending party being required to return the other party to their previous position. • The offending party pay the other party damages in relation to the breach. Damages In situations where it’s not feasible for the original obligations of the contract to be upheld, the court will generally require the offending party to pay damages to the party that has been wronged. The amount of these damages can be calculated in many ways. It can be helpful to be aware of these methods so that you can get a sense of the value of your claim. • Expectation losses This form of damages is based on the principle that the payment of damages should return the innocent party to the position they would have been in had the offending party not breached the contract. In determining the amount, the court will compare the advantages that the innocent party would have received had the offending party not breached the contract against the benefits that the innocent party actually received. The difference between these two amounts will then be the ‘expectation loss’. • Loss of chance If you can prove that the offending party’s breach has caused you to miss that profit, as the court will factor it into the amount of damages it awards. • Reliance loss Reliance loss will be awarded in instances where a party’s breach of contract causes the other party to waste their own resources. It’s important to note that this will only apply where those resources would not have been wasted if the offending party had not breached the contract. Wrap up When dealing with breaches of contract, there are many ways in which parties can seek to resolve their dispute and seek compensation. While we recommend that you try to resolve your disputes through negotiation and mediation, it’s important that you’re aware of your rights and the damages you may be potentially entitled to. This will give you a greater understanding of your position, allowing you to engage in negotiations more confidently. If this article has raised any questions for you, please contact the commercial team at Clinch Long Woodbridge Lawyers. By Peter Clinch. Principal, Clinch Long Woodbridge Lawyers Peter Clinch is Principal at Clinch Long Woodbridge Lawyers, a Sydney-based law firm with a focus on pharmacy. Peter assisted many pharmacists with a broad range of issues affecting their businesses. Inquiries: pclinch@clw.com.au or 02 92794888. RETAIL PHARMACY • NOV/DEC 2020