Types of Damages Available for Breach of Contract
What Types of Damages are Available in a Breach of Contract?
Depending on the nature of the breach, you may have several different remedies available to you. The remedies may be subject to reduction or modification if the injured party has also breached the contract. Damages are monetary awards, and they include:
- Compensatory Damages: These are damages for a monetary amount that is intended to compensate the non-breaching party for losses due to the breach. The aim is to “make the injured party whole again”. There are two types of compensatory damages:
- Expectation Damages: Damages intended to cover what the injured party expected to receive from the contract. Calculations are usually straightforward as they are based on the contract itself or market values.
- Consequential Damages: These are intended to reimburse the aggrieved party for indirect damages besides the contractual loss; for example, loss of business profits due to an undelivered machine. They must “flow from the breach”, and be reasonably foreseeable upon entering into the contract.
- Liquidation Damages: Damages that are specifically provided for in the contract. These are available when damages may be hard to foresee and must be a fair estimate of what damages might be in case of breach. Determined during contract formation.
- Punitive Damages: Intended to punish the breaching actors and to deter them from committing future breaches. Fairly rare in contract cases, though they may be available in certain fraud and tort causes of action that overlap with contract law.
- Nominal Damages: These are damages which are awarded when the injured plaintiff does not actually incur a monetary loss. Also rare in contract cases because breaches of contract typically involve some sort of loss to one party. May be available in tort crossover claims.
- Restitutionary Damages: These are not really legal damages per se, but rather are an equitable remedy to prevent the breaching party from being unjustly enriched. For example, if one party has delivered goods but the other party failed to pay, they may be entitled to restitutionary damages to prevent the unjust enrichment.
What other Breach of Contract Remedies are Available?
Relief for contract breaches can come in two forms: legal damages, which are the monetary awards discussed above, and equitable remedies. Equitable remedies are rendered when monetary damages will not properly remedy the situation. They involve the court ordering the parties to take or refrain from some sort of action, and include:
- Specific Performance: Basically a decree requiring the breaching party to perform their part of the bargain in the contract. For example, if one party has paid for delivery of goods, but the other party did not ship them, a specific performance decree might require the goods to be properly delivered.
- Contract rescission: The former contract which is the subject of dispute is “rescinded” (cancelled), and a new one may be formed to meet the parties’ needs.
- Contract reformation: The former contract is rewritten with the new contract reflecting the parties’ true intent. Reformation requires a valid contract to begin with and often is employed where terms of the contract are mistaken or disagreed upon.
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Last Modified: 05-10-2012 02:45 PM PDT
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