“In commercial activities, agreements between parties are often recorded in a contract. Although the parties are legally obliged to comply fully with the contract, breach of such contract may happen regardless of intentionally or not. The aggrieved party should therefore apply commercial remedies to protect their rights.“
The most commonly applied commercial remedies are:
1. Strict compliance with contract:
This remedy has the function to guarantee proper performance of a contract in accordance with the original intention of the parties. It is applicable to any contract violations.
How to apply:
– The aggrieved party requests the breaching party to properly perform the contract in strict accordance;
– In cases where the breaching party fails to comply with the agreements stated in the contract, the aggrieved party has the right to: purchase goods or services from another distributor/provider for substitution; voluntarily rectify the defects of the goods delivered; etc. Meanwhile, the breaching party must be responsible for any price difference and incurred expenses.
The remedy of strict compliance of contract cannot be applied simultaneously with other remedies, except for penalty for breach of contract and damages. If the breaching party fails to properly comply with the contract, the aggrieved party is entitled to continue implementing other remedies.
2. Penalty for breach of contract:
This remedy enhances contract compliance of the parties. The aggrieved party has the right to request a fine payment from the breaching party once the contract is violated.
To apply this remedy, there must be an agreement between the parties concerning the penalties for contract violations simultaneously with a committed breach of contract, which the parties agree as the condition for applying such remedy.
The maximum fine level is 8% of the value of the breached contractual obligation, except for the following sectors:
– For construction sector, the maximum fine level is 12% of the value of the breached contractual obligation;
– For assessment sector, the fine level must not exceed 10 times the assessment service remuneration.
Damages is a commercial remedy whereby the aggrieved party is entitled to receive compensation for material loss caused by breach of contract. On the other hand, the breaching party is obliged to pay damages covering value of the actual loss and the direct profit, which the aggrieved party would have earned if such breach had not been committed.
Liability to pay damages arises upon existence of all of the following elements:
(i) Breach of the contract;
(ii) Material loss;
(iii) Act of breaching the contract is the direct cause of the loss.
Damages can be simultaneously applied with other remedies.