Contract Remedies - Cumulative versus Exclusive Remedies
The remedies provisions are often glossed over during business contract negotiations. But these are the first places a court will look to for guidance in a contract dispute, so it can better understand the intent of the parties. Therefore, it's important to carefully review your contract's remedies provisions, and seek professional help to help you negotiate them.
Most courts today recognize that remedies are cumulative (in the absence of contrary contract language). “Cumulative” means that the non-breaching party is permitted to initially simultaneously pursue all available remedies (contract remedies, monetary damages, equitable relief, you name it) against the breaching party, even if the alternative theories of recovery are inconsistent. This is the legal equivalent of throwing everything against the wall and seeing what sticks. No worries though, in contract litigation, the court generally isn’t going to allow the non-breaching party to be made “more than whole”, so sometime during the proceedings it will pick or require the claimant to pick its remedy.
Despite widespread court recognition of the cumulative remedies concept, many business contracts take a belt and suspenders approach to remedies and include a cumulative remedies provision for good measure. Here is an example…
“All rights and remedies provided in this Agreement are cumulative and not exclusive of any other rights or remedies that may be available to the parties, whether provided by law, equity, statute, in any other agreement between the parties or otherwise.”
This works as long as the parties actually intend for the remedies to be cumulative, which usually isn't the case if the parties include an exclusive remedy provision somewhere else in the contract. An exclusive remedy is intended by the parties to be the only remedy to compensate an aggrieved party for a particular type of breach. Liquidated damages are an example of an exclusive remedy - something to the effect of "if you breach this provision, pay me X dollars, and we'll call it even." It's common sense that somebody who agrees to sumbit to pay liquidated damages doesn't want to find out later that it's also liable for other types of damages or relief. But this is exactly what may happen if you spend a lot of time negotiating an exclusive remedy, but then neglect the cumulative remedies provision still hanging around in the boilerplate section of the hand-me-down form contract you're using. In the next few columns, I’ll discuss the consequences of doing so, and some possible work-arounds.
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