Types of Contract Damages

Breach of contract lawsuits are probably the most common commercial cases that are handled by litigators.  In essence, a breach of contract lawsuit involves a legally enforceable agreement that one party breached entitling the other party to damages.  There are a few types of contract damages that are available to parties who prevail in breach of contract actions.  The kinds of damages available depend on the facts of a case, but there are few categories of damages that may be recovered in a breach of contract matter.

Liquidated Damages

Some contracts have clauses that specifically regulate the types of contract damages available.  Indeed, some contracts expressly state that a party may only obtain a set amount of damages if a breach of contract action is filed about a given transaction.  If a deposit is involved in a contract, this is normally designated as the amount of damages that can be exclusively recovered in a given transaction.  Courts will only hold parties to liquidated damages clauses if the clauses are reasonable.  If it seems that one party to a contract is specifying a large amount of damages to dissuade people from breaching agreements, the clause will not be enforced.  Nevertheless, liquidated damages clauses are found in a number of contracts, and they may make it easier to calculate the damages available in a given breach of contract case.

Compensatory Damages

Compensatory damages constitute one of the main types of contract damages available to plaintiffs in breach of contract actions.  Compensatory damages are aimed at making the party who has suffered from a contract breach whole again.  The types of damages that would restore a party to the position they would be in if the contract had not been breached depends on the circumstances of a given case.

For instance, if a party was unable to realize business profits because of the contract breach of another party, then lost profits may be recovered as compensatory damages.  In addition, if a party had to spend out-of-pocket sums because of a party’s breach of contract, then this money may be recovered as compensatory damages as well.  However, there are some limits to the amount of compensatory damages a party may obtain in a breach of contract case.  For instance, such damages usually must be a direct result of a party’s contract breach, and any damages that are too far removed from a party’s breach of contract will not be recovered.  In addition, compensatory damages will generally not be recovered if the damages suffered by a party were not reasonably foreseeable.  Nevertheless, compensatory damages are the main types of contract damages available to plaintiffs in breach of contract matters.

Equitable Relief

It is oftentimes important that non-monetary relief can be obtained in addition to several types of contract damages available in breach of contract matters.  One important kind of equitable relief obtainable to parties in contract lawsuits is reformation.  This involves a court changing the terms of the contract for equitable reasons, such as when there has been a mistake between the parties, there is some kind of fraud, or other compelling reasons.  Rescission is when a judge determines that a contract should be dissolved, and the parties should return to the positions they were in before they entered into a contract.  Furthermore, courts can also grant specific performance to compel parties to perform certain acts as a result of a breach of contract.  This usually involves the sale or unique goods, real estate, or other situations in which parties would not be made whole by monetary damages alone.  Along similar lines, courts are also empowered to issue injunctions preventing parties from taking certain acts if there is a sufficient basis to do so.  Depending on the circumstances of a breach of contract matter, these forms of equitable relief may be the primary forms of relief sought in a lawsuit.

Litigation and Other Expenses

Although parties are usually required to pay for their own attorneys’ fees, litigation costs are another one of the types of contract damages available in some breach of contract matters.  Contracts can specify that a prevailing party to litigation involving a given contract will pay the other party’s attorneys’ fees.  Some contracts simply specify that one party will pay for the other party’s litigation costs, but not the other way around.  Courts usually review bills to make sure that the attorneys’ fees that the other party needs to reimburse are reasonable, but such provisions are typically enforced.

In addition, contracts can also specify that one party needs to pay for all of the other expenses associated with pursuing a right under the contract.  This can include filing fees, hiring consultants, private investigators, and other costs.  Depending on the type of case, this can add substantial expenses to a matter, and the amount that another party will need to reimburse only goes up as a litigation continues.  As a result, provisions in contracts that provide for the payment of attorneys’ fees and other costs can be a powerful incentive against breaching a contract.

The Rothman Law Firm has substantial experience negotiating contracts and taking breach of contract matters to litigation if this is needed.  We know all of the damages available in a breach of contract matter and ensure that our clients recover the most money possible.  If you are looking for an experienced New York and New Jersey attorney to review your legal issue, please feel free to contact The Rothman Law Firm to request a free legal consultation.