Types Of Damages When There Has Been A Breach

 

 

By Albert L. Kelley

 

When a party breaches a contract, and the breach has not been waived by the other party, there are several remedies and/or penalties that should be looked into. First, you can file suit for damages. Damages are the money that you lose due to the breach. It may be due to a reduction in value of goods or services, or the failure of a party to provide goods after payment. The theory for damages is that the innocent party should be put in the same position that they would have been in if there had not been a breach.

 

 

If the contract was performed, but improperly or insufficiently, a suit for damages still may be allowed, however, it generally is limited to the cost of correcting the improper or insufficient actions. This occurs when there is a sales contract and not all the items are delivered, or in a construction contract where the work is not fully performed and another contractor has to finish it.

 

 

There are three types of damages: Compensatory, nominal and punitive.

 

 

Compensatory damages are the amount necessary to compensate the plaintiff for his loss. They equal the amount actually lost by the plaintiff or the amount needed to correct the breach.

 

 

Sometimes the court feels that the plaintiff should recover something, but there is no actual monetary loss, or the loss is extremely minimal. The court can award what are called nominal damages. These are usually small awards, often only $1 and are basically awarded just to give the plaintiff a moral victory.

 

 

Punitive damages are awarded to the innocent party to punish the wrongdoer. Punitive damages are awarded in excess of the actual compensatory damages. As a general rule, punitive damages are not allowed in contract actions. There are often business reasons to breach a contract [perhaps a cheaper supplier is found, or a contract will take too long to complete and another person can complete it faster]. Because we live in a business society, we don’t want to punish people for trying to improve their business.

 

 

Damages also can be divided into direct and consequential damages. Direct damages are those that spring directly from the breach itself. A consequential damage is one that is related to the breach, but not because of the breach alone. In other words, it is not necessarily a foreseeable damage. Let’s go with an example. I buy a new car and the brakes fail the next day. That is a breach of contract, because the car wasn’t in the condition it was warranted for. These are direct damages, as they are directly related to the breach of contract. I can recover damages for the repair of the brakes. If because of my brake failure, I get into an accident and there are other damages to the car, I might be able to get recovery for this as well, as these damages are foreseeable. What if because of the brake failure and subsequent accident, the stress gives me a heart attack? This is not reasonably foreseeable and is called a consequential damage. It is generally not compensable in a contract action.

 

 

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is so the author of “Basics of Business Law” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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