When a party fails to perform their obligations under a valid contract, Australian law provides several remedies for breach of contract. These remedies are designed to compensate the injured party, enforce compliance, or restore parties to their original positions before the agreement.
The appropriate remedy depends on the nature of the breach, the harm suffered, and whether monetary compensation alone is sufficient to achieve justice.
Key Remedies Available Under Australian Contract Law
Australian courts recognise both common law and equitable remedies. Common law remedies primarily involve financial compensation, while equitable remedies are non-monetary and granted at the court’s discretion when damages are inadequate.
Understanding the types of breach of contract is crucial before determining which remedy is appropriate — whether it involves a minor contractual failure or a fundamental non-performance that justifies termination.
1. Damages
Damages remain the most frequently awarded remedy in breach of contract cases. Their purpose is to compensate — not punish — the breaching party. The injured party is placed, as far as money allows, in the position they would have been in had the contract been fulfilled.
Types of damages include:
- Compensatory Damages: Cover direct losses sustained from the breach.
- Consequential Damages: Compensate for secondary or indirect losses, such as loss of profits or business opportunities.
- Nominal Damages: Awarded where a breach occurred but no measurable financial loss resulted.
- Liquidated Damages: Pre-agreed amounts set out in the contract, provided they represent a genuine pre-estimate of likely loss.
Australian courts will not enforce penalty clauses, which seek to impose punitive sums disproportionate to the actual loss.
2. Specific Performance
Specific performance is an equitable remedy compelling the breaching party to fulfil their contractual obligations. It is typically used where monetary damages are insufficient — for instance, in contracts involving real estate, rare goods, or intellectual property.
Courts will grant specific performance only when:
- The contract is valid and certain in its terms
- Damages would not provide adequate relief
- Enforcement would not impose undue hardship or inequity on the defendant.
This remedy enforces the principle that agreements voluntarily entered into must be honoured — particularly when the subject matter is unique or irreplaceable. If your matter involves real property or conveyancing, you should find a property lawyer to ensure compliance and enforceability before seeking specific performance in court.
3. Injunctions
An injunction is a court order preventing or compelling specific conduct to avoid or rectify a breach.
- A prohibitory injunction restrains a party from continuing or commencing a breach (e.g., using confidential information).
- A mandatory injunction requires affirmative action to restore the status quo.
Injunctions are often sought in cases involving employment restraints, confidentiality breaches, or non-compete clauses, where continuing harm cannot be quantified purely in monetary terms.
4. Rescission
Rescission sets aside the contract and returns the parties to their pre-contractual positions. It is appropriate where the breach goes to the root of the agreement — such as fraud, misrepresentation, duress, or mutual mistake.
The remedy effectively “unwinds” the contract, cancelling future obligations and requiring the return of any exchanged benefits. However, rescission will not be granted where:
- Restitution in full is impossible
- The innocent party has affirmed the contract
- A third party has acquired rights in good faith.
5. Restitution
Restitution is designed to prevent unjust enrichment. It restores benefits unjustly retained by the breaching party — such as deposits or prepayments for goods or services not supplied.
This remedy ensures fairness where one party gains a financial advantage at another’s expense, even if a formal contract no longer operates.
Equitable Remedies and Judicial Discretion
Equitable remedies, such as specific performance and injunctions, are not automatic rights. They are discretionary and depend on principles of fairness, good faith, and proportionality. The applicant must demonstrate:
- Clean hands (no misconduct in the matter)
- Timely application
- That enforcement would achieve just outcomes
Courts exercise caution to ensure equitable relief aligns with both public interest and contractual certainty.
Specific Performance vs Damages
The distinction lies in the nature of the relief sought:
- Damages compensate through financial recovery;
- Specific performance compels actual performance of the contractual promise.
Courts prefer awarding damages, as they are easier to enforce, but will order specific performance where the subject matter (e.g., property or bespoke assets) cannot be adequately valued in money.
Liquidated Damages vs Penalties
A valid liquidated damages clause represents a reasonable pre-estimate of potential loss agreed upon by both parties. Conversely, a penalty clause imposes an excessive amount to deter breach and is unenforceable.
The High Court of Australia has consistently held that for a clause to be valid, the amount must be proportionate to the legitimate interest being protected.
Rescission as a Remedy
Rescission is granted where the breach fundamentally defeats the contract’s purpose. Common examples include fraudulent misrepresentation or complete non-performance.
However, the right to rescind may be lost if the party delays action or affirms the contract after learning of the breach.
Defences to Breach of Contract
Defendants may argue:
- The contract was void or unenforceable
- Performance was frustrated by unforeseen events
- The plaintiff failed to mitigate losses
- Misrepresentation, duress, or mistake occurred
- The claim is barred by limitation periods.
These defences ensure that liability is imposed only where contractual duties were validly owed and breached.
Remedies for Small Business Contracts
For small businesses, breaches can cause immediate operational and financial harm. Legal remedies may involve alternative dispute resolution methods — such as mediation or arbitration — before pursuing litigation.
Engaging a commercial lawyer helps assess contract terms, quantify losses, and determine whether damages, injunctions, or rescission is most appropriate.
FAQs
Before commencing legal proceedings, it is essential to understand how remedies apply in practice.
What legal actions can be taken for a broken contract?
Actions include claims for damages, injunctions, or specific performance. The appropriate course depends on the breach’s nature and severity.
How can damages be claimed?
The claimant must prove a valid contract, a breach, a causal link between the breach and loss, and that the loss was reasonably foreseeable.
What types of damages are available?
Compensatory, consequential, nominal, and liquidated damages are common. Each addresses a different aspect of financial harm.
When is rescission used?
When the breach is so serious that it defeats the contract’s core purpose, rescission allows both parties to be restored to their pre-contract state.
Are equitable remedies common?
They are less common and used only when damages fail to provide adequate redress — particularly in cases involving property or intellectual rights.
Conclusion
Under Australian law, remedies for breach of contract aim to uphold fairness, deter non-performance, and preserve the integrity of commercial agreements.
Whether through damages, specific performance, or equitable relief, the chosen remedy reflects the courts’ balancing of legal rights and practical justice.
For tailored legal advice or to pursue a contractual dispute, contact LegalFinda to connect with experienced commercial contract lawyers who can guide you through negotiation, enforcement, or court proceedings.
.png)
.png)
.png)