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Consequences of a Breach of Employment Contract

A large part of employment law is the result of one party not fully meeting the obligations stated in a contract. HKM is well placed to help in these situations.

A fixed-term employment contract is a legal agreement that outlines specific duties, payment terms, and end dates. If further work is required, a new contract must commence.

A breach of contract occurs whenever a party who entered a contract fails to perform their promised obligations. This happens frequently so a robust body of law has grown to resolve disputes. 

The overarching goal of contract law is to ensure the harmed party can return to the same economic position they would be in had no breach of contract occurred. Therefore, the default remedy available for a breach of contract is monetary damages. 

These damages are usually limited by what is listed in the contract. For example, if a party agrees to pay $40,000 to have work completed but decides to only pay $12,000 once the job is completed, the court will award the party $28,000 in damages. 

In some circumstances, a party may be able to recover more money than they were contracted to receive. This might happen when a party can be granted compensation for the reasonable expenses, they incurred due to the reliance on the contract being fulfilled correctly.

 For example, if you purchased additional items to go with the contracted item, then when the original item is not supplied, the additional items are no longer of any use. They must try to recover the cost of the additional items, and any shortfall could be awarded on top of the contracted amount.

The consequences of a breach of contract include:

Loss of Money

Once an employment contract is breached, the income from the contract stops. Even if it is not the employee’s fault, contesting the breach can take months or years, meaning it will be a lengthy period before any money is seen in the best possible outcome, and in the worst possible outcome, no money will be received at all.

It is wise for employees under contract to have savings available as well as additional contracts they can quickly pick up if needed.

Negative Reputation

If you are victimized by fixed-term contract breaches, you may find this negatively affects your reputation. It can then be difficult to find new work in the same career field. Even if the breach was the employer’s fault, it can be difficult to counter the negative comments that have already been publicized about you.

The best protection is to avoid any companies with questionable hiring practices.


When applying for jobs you need to include previous employers and the reason for ending that employment may be raised. Even if the employer was clearly in the wrong, focusing on that can just sound like “sour grapes”, winging, and making excuses.

In competitive industries, there is little incentive to hire someone with any hint of controversy, even when they might have done nothing wrong.

Low Morale

Some companies hiring via fixed contracts work on a ‘use and lose’ basis. They just want the work done, give no feedback to the employee, and move on to the next contractor. This can lead to low morale and the possibility of poor performance.

Companies that consistently perform will take care to carefully screen potential employees and treat them respectfully once they begin.