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The content concerns Finnish legislation.
  1. Home⁠
  2. Contracts⁠
  3. Breach of Contract and Its Consequences⁠
  4. Consequences of Breach of Contract and Limitations of Liability⁠
  5. Consequences of Breach of Contract in General
  1. Consequences of Breach of Contract and Limitations of Liability

Consequences of Breach of Contract in General

When one party fails to perform their contractual obligations, the party is in breach of contract and the other party has a right to demand the fulfillment of the agreement and to demand performance of those obligations with the help of the authorities. However, it is not always possible or even viable to demand that the other party perform the original contract. Instead, it may be better to demand other consequences.

The consequences of a breach of contract vary and are dependent on which party is in breach. Naturally, the seriousness of the breach also affects the consequences. The common consequences are a price reduction, remedy of the defect, compensation for damage and interest for delay. It is only possible to rescind the contract when the breach is substantial.

The parties may agree on the consequences of the breach of agreement when making a contract or separately. It might be reasonable to agree on liquidated damages for delay for example. See more about the liquidated damages in article [Liquidated damages].

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  • Interest for Delay

    If a payment of debt is delayed, a defaulting party has an obligation to pay interest for late payment in accordance with the Interest Act. The interest for delay has to be paid even if there is no agreement on it, unless it is a question of certain exceptional cases.
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  • Damages

    A breach of contract may also render the breaching party liable to pay damages to the other party for any loss resulting from the breach. Recoverable damage is e.g. personal and proprietary damage and economic loss. The compensation may for instance include reclamation and investigation costs, a price between the original and replacement product or loss of income. Personal damages appear seldom and are not so often compensated.
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