Damages for Breach of Contract

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Generally, the purpose of an award of damages for breach of contract is to compensate the injured party and provide the benefits promised by the contract. The general rule is that damages are meant to place the claimant in the same position as if the contract had been performed.In the 16th century, when our English forbears began resolving disputes through trial by jury rather than ordeal or battle, courts were divided into courts of law and courts of equity. The law courts dealt with money damages for various offences like breach of contract, negligence or intentional torts.

In order to discourage people from breaching contracts the law allows various remedies to the party to the contract who lost the benefit of the bargain. In the event a breach is proved a court may award:

1. damages,

2. specific performance,

3. contract rescission, and

4. contract modification or reformation.

Compensatory Damages

Compensatory damages are not meant to be punitive in nature. The goal is not to punish the breaching party for “immoral” conduct, but rather to put the non-breaching party back into the position he or she would have been in, had the contract been performed.

Quantum Meruit

A court can award one party payment for what they deserve for any work that he or she performed before the other party breached the contract. Translated from Latin, the term means “as much as he deserved.”

Statutory Measure of Contract Damages

In California, for example, in very limited circumstances, statutory law specifies the measure of damages.

EQUITABLE REMEDIES

In modern American jurisprudence judges sit as both law judges and equity judges.

Specific Performance

Contract Rescission

If the court determines that the contract of insurance was entered into as a result of deception or mistake, the contract which is the subject of dispute can be “rescinded” (cancelled from its inception as if it never existed). This is a remedy typically given when both parties agree to cancel the contract or if the contract was created through fraud, misrepresentation or concealment of material fact, or mistake of material fact.

When a contract is terminated according to its terms, damages are limited to those accrued prior to termination. 

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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

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