Nominal Damages in a Contracts Claim
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What Are Nominal Damages?
Nominal damages are awarded in legal cases where the plaintiff has been injured but did not incur any real-world economic or financial losses. They are not intended to compensate the victim but rather are awarded to vindicate a plaintiff’s rights and to acknowledge that they have been wronged. Nominal damages are also awarded where the plaintiff’s did suffer economic loss but it cannot be calculated.
Nominal damages are typically small amounts of money, sometimes as low as $1, which serves as an affirmation that the defendant’s conduct is not tolerated. “Nominal” means “in name”, so the award is merely a token of recognition that there was a wrongdoing.
The most common instance where nominal damages are awarded is in a trespass claim, where the defendant has walked across a neighbor’s property but the plaintiff did not suffer any harm from the trespass. In this case a nominal damages award would be appropriate.
In What Types of Contract Claims Can Nominal Damages Be Awarded?
Nominal damages in a contracts claim are very rare. This is because most breaches of contract usually result in some form of economic loss to the non-breaching party.
There are however a few instances where nominal damages are awarded in a contracts cause of action. These may include:
- Breaches of contract where the losses cannot be calculated: These often involve situations where the value of property cannot be determined
- Contracts claims that are combined with a tort cause of action: Contracts cases often involve tort claims such as simultaneous fraud or coercion. Nominal damages may be awarded, though they will usually be directed towards the tort claim.
- Bad faith contracts: Many courts award nominal damages where the breaching party has acted in bad faith through lying or deception. In this case the nominal damages express the court’s disapproval of the bad faith.
An example of a contracts claim where nominal damages can be awarded is as follows: Suppose A and B enter into a contract where A is to provide insurance for B. Now A fails to provide insurance, but afterwards B takes steps to insure themselves. A court will probably not award losses to B since they have already insured themselves. Since there are no losses, the court may award nominal damages to acknowledge that A failed to perform their contractual duty.
What Proof Is Required Before Issuing Nominal Damages?
Nominal damages are only awarded where the plaintiff has not suffered financial losses or when their losses cannot be calculated. Thus, only the defendant’s wrongdoing must be proven before awarding nominal damages. In a contracts claim, the focus will be on the defendant who breached the contract rather than on the plaintiff, since the losses cannot be determined.
Why Are Nominal Damages Important if They Are Small?
Nominal damages are important because they may sometimes open the door to other types of damages. For example, punitive damages cannot be awarded unless the plaintiff is first awarded compensatory, nominal, or restitutionary damages. Thus, nominal damages have often been described as a “peg on which other damages are hung”.
Punitive damages are not usually awarded in contracts cases except in the instances mentioned above involving bad faith or combined tort claims. In these types of cases, nominal damages then become an important consideration when courts are calculating monetary awards.
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Last Modified: 12-19-2013 10:08 AM PST
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