Damages for Breach of Contract: Legal Standards and Remedies

Contract damages are a form of judicial relief where a court orders the breaching party to pay a specific sum to the aggrieved party. Unlike tort law, which focuses on social wrongs, contract law focuses on the private legislation created by the parties through their agreement.

The purpose of these remedies is restorative. The law aims to fulfill the benefit of the bargain. It acknowledges that while the court cannot usually force someone to act through specific performance, it can force the economic equivalent of that action through a contract loss recovery payment.

When expectation damages are too speculative to calculate, such as in a new business venture with no profit history, the court may award reliance damages. These reimburse the plaintiff for the expenses incurred in preparing for or performing the contract. It puts the party back in the position they were in before the contract was signed.

Restitution focuses on the breaching party rather than the victim. It requires the defendant to give back any benefit or unjust enrichment they received from the plaintiff. This is often used when a contract is found to be unenforceable or void.

A defendant is only liable for losses that were foreseeable at the time the contract was signed. If a loss is so unusual or indirect that the parties could not have contemplated it, the court will likely exclude it. This is a foundational principle of contractual damages claims.

The plaintiff bears the burden of proving that the breach directly caused the loss. Furthermore, the damages must be proven with reasonable certainty. SJKP LLP utilizes sophisticated financial audits to transform felt losses into proven damages that survive judicial scrutiny.

Also known as special damages, consequential damages cover losses that result indirectly from the breach, such as lost profits or damage to business reputation. To recover these, the plaintiff must prove the defendant knew, or should have known, that these specific losses would occur if the contract were breached.

Many sophisticated agreements include waivers of consequential damages. SJKP LLP forensically reviews these clauses to determine if they are enforceable or if they can be bypassed due to unconscionability or gross negligence.

Because the goal is compensation, the court will not award extra money just to punish the defendant. Even a willful or malicious breach is usually only subject to compensatory contract damages.

The only clinical exception is when the breach is accompanied by an independent tort. If the defendant committed fraud or acted in bad faith, which is common in insurance coverage disputes, the court may allow punitive damages to deter future misconduct.