What are My Rights if My Contract is Wrongfully Terminated?

People commonly associate “wrongful termination” with employment contracts. However, any contract is susceptible to wrongful termination. Depending on the type of contract and the facts of your circumstances, your remedy may vary.

A wrongful termination of a contract is a termination of the contract without lawful justification. For example, a subcontractor performs concrete work on a construction project under a contract with the general contractor. The concrete work is of good quality and is performed on time. The general contractor nonetheless kicks the subcontractor of the job before all the work has been performed. In a situation like this, there may be a wrongful termination of the subcontract.

If there is a wrongful termination like the example above, the subcontractor may be entitled to recover more than just payment for the work it had actually completed at the time of termination. Under Utah law, the subcontractor would be entitled to recover its expected net profit, monetary damages in an amount equal to what the subcontractor would have received if it was allowed to complete the contract minus the costs the subcontractor would have expended to complete the project.

As another example, a customer enters into a contract with a bakery where the bakery agrees to deliver 15 cookies per week to the customer for 4 weeks. The customer pays the bakery in advance for the cookies. After the third week, the bakery calls the customer and terminates the contract. In this case, the customer has a few alternate remedies. The most common remedy would be to receive a refund for a week’s worth of cookies. However, if there was a cookie shortage and it was imperative that the customer obtain another week’s worth of cookies, the customer could get an order from a court directing the bakery to produce and deliver another week’s worth of cookies. This is called specific performance.

The remedies available to you will depend greatly on the facts and circumstances. Our office is happy to help give you an idea of what your rights and remedies are in each case.

Skoubye, Nielson, Johansen Attorneys Salt Lake City Utah

Chase B. Ames