Contracts form the backbone of nearly all commercial and real estate transactions in California. When one party breaches a contractual obligation—whether by failing to perform, delaying performance, or repudiating the agreement—California law provides a variety of legal and equitable remedies. Understanding the scope, limitations, and applicability of each remedy is essential for parties seeking redress and for drafting enforceable contracts that anticipate and allocate risk.
This article outlines the remedies available for breach of contract under California law, examining monetary damages, specific performance, rescission, restitution, and declaratory relief, with reference to statutory authority and applicable case law.
Compensatory Damages
The most common remedy for breach of contract is an award of compensatory damages, intended to place the non-breaching party in the position they would have occupied had the contract been fully performed.
Under California Civil Code § 3300, the measure of damages for breach of contract is:
“…the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.”
See Civ. Code § 3300
This includes both general damages (those arising naturally from the breach) and, in certain cases, special damages (those arising from special circumstances known to the breaching party at the time of contracting). See Erlich v. Menezes, 21 Cal. 4th 543, 550 (1999) (view opinion).
However, damages must be proven with reasonable certainty. Remote, speculative, or unforeseeable losses are not recoverable. See Lewis Jorge Construction Mgmt. v. Pomona Unified School District, 34 Cal. 4th 960, 975–76 (2004) (view opinion).
Liquidated Damages
Parties may pre-define the amount of damages in the event of a breach through a liquidated damages clause. These clauses are enforceable under California Civil Code § 1671 if they reflect a reasonable estimate of probable loss and are not considered a penalty. For contracts not involving consumers, a liquidated damages provision is presumed valid unless it is shown to be unreasonable at the time the contract was made.
See Civ. Code § 1671
Specific Performance
When monetary damages are inadequate, courts may grant the equitable remedy of specific performance, compelling the breaching party to perform as promised. Specific performance is most often granted in contracts involving real property, due to its uniqueness.
Under California Civil Code § 3384:
“Except as otherwise provided in this article, specific performance may be compelled when the act to be done is such that compensation in money would not afford adequate relief.”
See Civ. Code § 3384
In Real Estate Analytics, LLC v. Vallas, the Court of Appeal affirmed that specific performance of a real property purchase agreement may be appropriate when the buyer demonstrates readiness to perform and the property is unique (view opinion).
To obtain specific performance, the plaintiff must show that the contract is definite and certain, that the plaintiff has fulfilled or is ready to fulfill their obligations, and that legal remedies (damages) are insufficient.
Rescission and Restitution
In certain cases, the aggrieved party may elect rescission, which voids the contract and restores the parties to their pre-contract positions. Grounds for rescission include material breach, fraud, undue influence, or mistake. See California Civil Code §§ 1688–1691
See Civ. Code § 1689
If rescission is granted, the court may also order restitution, requiring the breaching party to return any benefits conferred upon them. This is particularly useful where one party has already partially performed under a voidable contract.
Declaratory Relief
Where parties dispute their respective rights or obligations under a contract, a party may bring an action for declaratory relief under Code of Civil Procedure § 1060. This is not a remedy in the classic sense but a judicial determination of rights, which may help avoid future breaches and provide clarity where performance is contested.
See CCP § 1060
Declaratory relief is often sought in tandem with other remedies in disputes involving long-term service contracts, leases, and real estate development agreements.
Attorney’s Fees and Costs
California follows the American Rule, whereby each party bears its own legal fees unless a contractual provision or statute provides otherwise. Parties may include an attorney’s fees clause in their agreement. If prevailing party language is included, courts may award reasonable fees under California Civil Code § 1717, which governs contractual fee-shifting provisions.
See Civ. Code § 1717
Limitations on Remedies
It is critical to note that California courts will not enforce contractual remedies that are unconscionable, contrary to public policy, or expressly waived in violation of law. Punitive damages are not available for breach of contract alone unless the breach also constitutes an independent tort involving fraud, oppression, or malice. See Cates Construction v. Talbot Partners, 21 Cal. 4th 28, 61 (1999) (view opinion).
Moreover, mitigation of damages is a duty imposed on non-breaching parties. A plaintiff cannot recover damages they could have reasonably avoided. See Valle de Oro Bank v. Gamboa, 26 Cal. App. 4th 1686, 1691 (1994) (view opinion).
Conclusion
California offers a robust set of remedies for breach of contract, ranging from compensatory damages to specific performance and rescission. Choosing the appropriate remedy requires careful analysis of the facts, the nature of the breach, the underlying subject matter (particularly in real estate), and the available evidence.
At Guiding Legal Counsel, APC, we provide strategic counsel for both plaintiffs and defendants in breach of contract disputes. Whether you are enforcing a purchase agreement, seeking rescission of a flawed transaction, or defending against overreaching claims, we deliver targeted solutions grounded in statute and precedent. Contact us today to schedule a consultation and assert your contractual rights with clarity and confidence.