Breach of Contract Damages
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What Is a Breach of Contract?
A breach of contract occurs when one party fails to perform their duties and responsibilities that are spelled out in a contract. A breach can also occur when they perform their duties in a manner that doesn’t conform to the standards of quality that are required in the contract.
Some examples of actions that usually result in a breach of contract may occur:
- Failing to pay for a product on time
- Failure to deliver a product as specified
- Deficiencies in the quality of materials used
- Failure to complete a construction project on time
- Various other errors or misconduct
When providing a remedy for a breach of contract, a court will usually issue either: damages awards (monetary amounts) or an equitable remedy (such as an injunction).
What Types of Damages Are Available for a Breach of Contract?
There are two general categories of damages that may be awarded in a breach of contract claim :
1) Compensatory Damages: Also called "actual damages" are designed to cover the loss of the non-breaching party as a result of the breach. The amount awarded is intended to "make the injured party whole again". There are two types of compensatory damages:
- Expectation Damages: These are damages that are intended to cover what the injured party expected to receive from the contract. The damage awarded to the non-breaching party would be what the party would have benefited from the bargain
- Reliance Damages: Covers the loss the non-breaching party incurred in reliance of the contract. These damages are usually incurred by the non-breaching party while performing their contractual duty. They are designed to place the party in the position they were before the contract was entered into
- Consequential Damages: Also called special damages are intended to cover any loss incurred by the breach that are not directly related to the contract, but occurred outside the contract as a result of the breach and were reasonably forseeable by the contracting party when the contract was entered into.
2) Liquidation Damages: Damages that are specifically stated in the contract. These are available when damages are difficult to be calculated at the time the contract was formed. These damages are only allowed if they are reasonable and fair.
3) Punitive Damages: These are damages that are intend to punish the breaching party or make an example of the wrongdoer who has acted willfully and fraudulently. Punitive damages are usually not awarded in contract cases
4) Nominal Damages: These are damages that are awarded when the injured plaintiff does not actually incur a monetary loss, but the judge wants to show that the winning party was in the right. These are typically rarely awarded in contract cases because breaches of contract usually involve some sort of loss to one party, however they might be awarded in tort cases that cross over with a breach of contract case.
5) Restitution: Damages awarded to the non-breaching party when the defendant has been unjustly enriched at the plaintiffs expense. This usually occurs when plaintiff has conferred a benefit to the defendant and defendant has been unjustly enriched after the contract has become unenforceable.
What Are Special Damages?
Special damages are not damages that result directly under the contract, but rather damages that occur outside of the contract and was forseeable by the breaching party at the time the contract was entered into. Special damages may be issued in order to cover losses that aren’t included in a more general damages award. These are losses that result from or “flow from” a breach of contract. These include losses such as loss of business opportunities, damage to business reputation or goodwill, and loss of business property.
Special damages are only awarded if the damages were definite and actually forseeable. They cannot be mere guesses or speculations that party might have incurred this type of damage.
Do I Need a Lawyer for Help with Damages in a Breach of Contract Lawsuit?
Calculating damages is not always a straight-forward task. There can be many different factors involved in each case. You may wish to hire a business lawyer if you need help with a breach of contract claim. Your attorney can advise you on how to file a claim for breach of contract. A qualified lawyer can also assist you with other contract aspects such as drafting and editing an existing contract.
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Last Modified: 01-21-2015 11:20 PM PST
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