In principle, a breach of contract gives rise to an obligation to make good the damage which has been established. Liability for damages is provided by law separately for several different situations. Sometimes liability also arises without an express provision of law. So you may ask Do I need to do my part of the contract if the other person breach the contract? The lawyers are there to guide you there.
The purpose of damages is to place the aggrieved party to the financial position in which it would have been without the other party’s breach of contract. The amount of compensation is typically calculated by comparing the presumed financial impact of the contractual procedure with the financial situation resulting from the breach of contract. It should be recalled that the injured party must in all cases take reasonable measures to limit the damage. So What is a condition precedent for contract?
The amount of damage caused must be proven in order to obtain compensation, but in some cases it is very difficult. For example, assessing the financial loss resulting from a breach of professional secrecy or non-compete obligations can prove very difficult.
Consumer contracts need to be considered separately
Breaches of contract and their penalties are regulated separately for consumer trade and trade between private individuals. As a general rule, the provisions on consumer trade may not be derogated from to the detriment of the consumer.
In the case of a trade in goods between a trader and a consumer or a trade in goods between other parties, the consequences of the error are of the same type. However, there are differences in their conditions. In either case, however, the buyer must be vigilant and, as a general rule, notify the seller of the defect within a reasonable time after he discovered the defect or should have discovered it.
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Prepare for breach of contract with a contractual penalty
It is possible to prepare for possible breaches of contract already when the contract is drawn up. Certain agreements tend to include a contractual penalty clause aimed at improving compliance. A contractual penalty is a typical addition to, for example, non-compete and non-disclosure agreements, shareholder agreements and works contracts, as well as share and business transaction books. In accordance with the agreement, the contractual penalty will in principle always be paid as a result of the breach of contract and regardless of the amount of damage that may have occurred. Therefore, a contractual penalty can solve the problems related to the assessment of the amount of damages. The contractual penalty can be agreed separately by the parties, so the contractual penalty and the damages seem to be complementary. The contractual penalty clause does not automatically exclude liability for damages. With the non-compete law you can find the solutions.
The contractual penalty can be current or flat rate.
A current fine is typically associated with a situation of delay in which the fine payable increases in proportion to the delay in performance. Usually, for example, a daily or weekly payment is agreed, which can be, for example, a certain percentage of the total value of the delivery. With regard to the current fine, it is also worth agreeing on the maximum amount of the fine and the possibility for the injured party to terminate the contract once that amount has been met. A lump sum fine is usually used, for example, as an effect of secrecy and non-compete. A fine may be agreed to be paid in the event of any breach of contract or only in certain breaches of contract.