If a plaintiff wins at trial, they will generally be awarded damages to compensate their losses. In a contract dispute, damages are usually money awards that include the following:
- Compensatory Damages: Damage that cover an individual’s monetary and non-monetary losses.
- Liquidated Damages: A set amount of damages agreed to in a contract in the event of a breach.
- Restitution: Damages that reimburse a party for out-of-pocket expenditures because the other party breached the contract.
- Punitive Damages: Damages meant to punish an individual for extreme or intentional wrongdoing.
A less common type of damages that can be awarded are referred to as nominal damages. These are awarded when wrongdoing is present but no real financial harm has occurred. They are usually only $1 or $2 dollars.
It may seem unnecessary to award nominal damages because the amount of money is so small. However, nominal damages are still important because they prove that the plaintiff had a legal right to file the lawsuit and that the defendant’s behavior was wrong. It is often paired with the fact that there is no financial loss, or at least not one that can amount to more than the nominal damages.
For example, let’s say Company A entered a contract with Company B to manufacture 1,000 dolls. But the reality is that Company A doesn’t have the ability to manufacture dolls, but told Company B that they are able. Company A, instead, is hiring Company C to manufacture the dolls at 1/3 of the typical cost and will gain a large profit.
Company B suddenly realized that they had 1,000 dolls in storage, and when they contacted Company A they discovered that Company A isn’t even making the dolls. While Company B might not have suffered a financial loss, Company A clearly deceived them.
Company B might not have made a second contract with Company A and might have intended to break the contract, but it doesn’t take away from the fact that Company A formed the contract based on fraud/deception. In this case, Company B could be awarded nominal damages for the deception.
Additionally, nominal damages may open the door for punitive damages to be awarded. Punitive damages are only awarded in a small number of cases and cannot be considered unless the plaintiff is first awarded compensatory, nominal or restitution damages.
Punitive damages are not usually awarded in contracts cases, except when bad faith is involved or the contract claim is combined with some type of tort claim. In these types of cases, nominal damages become an important consideration when courts are calculating monetary awards and determining if punitive damages are proper.
If nominal damages only gives you a $1.00 amount, then why would a plaintiff request or want them? Typically, plaintiffs do not request nominal damages. Often, the judge or jury will award nominal damages based on the facts at hand.
Typically, contract disputes have a portion that claims whoever loses the lawsuit will need to pay the legal fees for the other party. This means even though the winning party is only awarded $1.00, the cost of their attorney will be completely covered in the decision.
In some rare cases, typically not in contracts cases, plaintiffs may request nominal damages. This may be done when the plaintiff knows they will win the case and simply wants to be recognized that the wrong was committed. They typically do not need the money and believe their case will be hampered if they requested anything more than nominal damages.
Nominal damages are rare in contracts cases because the majority of breach of contract claims usually involve some economic monetary loss to the plaintiff. Regardless, the plaintiff will still need to prove all the essential elements of a breach of contract claim in order to receive nominal damages.
Below are certain contract situations where nominal damages may be awarded:
- The value of the loss cannot be determined;
- The contract case is also combined with a tort claim. Common examples include fraud or coercion; and
- However, if nominal damages are awarded in this situation it will usually be because of the tort claim.
- The defendant acted in bad faith during contract negotiations or when executing their obligations under the contract.
Ultimately, nominal damages are best used in situations where there might not be a calculable harm. But there is, without a doubt, a harm that deserves to be recognized formally in a court of law.
Contract claims can be complex and challenging, especially when calculating losses. If you are filing an action for breach of contract, you should contact a local contracts attorney to assist you with your case and determine if nominal damages are appropriate.