Contract disputes in Georgia are claims built on the liability norms of the Civil Code: upon the debtor's breach, the creditor claims compensation of damage — both the loss actually incurred and the profit not received. The Code determines precisely when the claim may be brought, how an additional period is set in case of delay, and when the obligation converts into money. This page explains these rules under Articles 394, 404, 409, 410 and 411 of the Code.
Claiming damages upon breach
Under the first part of Article 394, upon the debtor's breach the creditor may claim compensation of the damage caused thereby. The rule does not operate where the debtor bears no liability for the breach — the ground of liability comes first, the claim after.
The second part of the same article governs delay: the creditor may set the debtor a period necessary for performance, and if the debtor fails to perform even within that period, the creditor may, instead of performance, claim compensation of damage. Under the third part, an additional period is not required where it is evident that it would produce no result, or where special circumstances — considering the interests of both parties — justify the immediate application of the claim.
The structure of a claim on these norms has three steps: first, the existence of the obligation and its breach; second, a ground of liability on the debtor's side; third, the establishment of damage with both of its components. Before the claim is filed, each step must be substantiated: the obligation fixed by the contract, the fact of non-performance or defective performance, and the damage connected with precisely that breach.
In practice the third step is decisive: the creditor must show what income would have been received upon due performance and how real that income was; the calculation of lost profit must rest not on conjecture but on a reasonable forecast.
The norm on delay is placed in the chapter on breach of obligation in bilateral contracts, so the claim of damage caused by the exceeding of the term is an independent ground that works together with the additional-period mechanism: the creditor first sets the debtor a period necessary for performance, and after its expiry claims compensation of damage instead of performance. The advance waiver admissible under Article 410, for its part, is the first thing checked when the contract is reviewed before a dispute — only the law or the parties' own agreement can deprive the creditor of the right to compensation.
Damage caused by delay
Article 404 frames delay separately: the creditor may claim compensation of the damage caused by the exceeding of the term. The norm compensates those cases where performance is not abandoned but postponed in time — and precisely that postponement causes the creditor damage.