12.3 Injunctions in Contract Law

Injunctions in contract law are powerful tools used to prevent or compel specific actions. They come in various forms, including preliminary, permanent, mandatory, and prohibitory injunctions, each serving a unique purpose in contract disputes.

Courts consider several factors when granting injunctions, such as likelihood of success, irreparable harm, balance of equities, and public interest. These remedies are particularly useful in enforcing non-compete agreements, protecting confidential information, and preventing intellectual property infringement.

Types and Requirements of Injunctions in Contract Law

Types of contract dispute injunctions

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• Preliminary injunctions granted before a trial to prevent irreparable harm require showing a likelihood of success on the merits
• Permanent injunctions granted after a trial on the merits require the plaintiff to succeed on the merits of the case
• Mandatory injunctions require a party to take a specific action are less commonly granted than prohibitory injunctions
• Prohibitory injunctions prevent a party from engaging in a specific action also known as negative injunctions (restraining orders)

Requirements for preliminary injunctions

• Likelihood of success on the merits plaintiff must demonstrate a strong probability of prevailing at trial (prima facie case)
• Irreparable harm plaintiff must show that without the injunction, they will suffer harm that cannot be adequately compensated by monetary damages (loss of business goodwill)
• Balance of equities the court must weigh the potential harm to the plaintiff against the burden on the defendant (undue hardship)
• Public interest the court must consider whether granting the injunction would serve the public interest (protect consumers, prevent unfair competition)

Factors for permanent injunctions

• Success on the merits plaintiff must have prevailed on the underlying breach of contract claim after a full trial
• Inadequacy of legal remedies monetary damages must be insufficient to compensate for the harm caused by the breach (unique goods or services)
• Balancing of hardships the court weighs the hardship on the defendant if the injunction is granted against the hardship on the plaintiff if it is denied (economic impact)
• Public interest the court considers the impact of the injunction on the public interest (enforce valid contracts, maintain market stability)

Use of negative injunctions

• Non-compete agreements injunctions can enforce non-compete clauses by preventing former employees from working for competitors (soliciting clients, using trade secrets)
• Non-disclosure agreements injunctions can prevent parties from disclosing confidential information in violation of an NDA (customer lists, proprietary formulas)
• Intellectual property infringement injunctions can stop a party from infringing on patents, trademarks, or copyrights (unauthorized use of software, counterfeit goods)
• Limitations on negative injunctions must be reasonable in scope and duration, cannot unduly burden the enjoined party or harm the public interest (overbroad geographic restrictions, excessive time periods)