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Recovering Damages for Breach Contract

There are a few different remedies for a breach of contract, like forcing the other party to perform their end of the bargain or receiving money damages. In most courts, monetary damage awards are the most common remedy for contractual breaches, as specific performance and other equitable remedies may not fall within the jurisdiction of those courts. This article focuses on money damages, and discusses several types of money damages that might be available to you if someone has breached a contractual agreement to your detriment. We recommend that you consult with a New Mexico business and contract attorney if you are considering pursing a breach of contract claim.

Exactly What Types of Damages Are Available?

Contract DamagesIn general, there are 2 types of money damages that can be awarded to you if you can prove that a breach of contract has occurred on a legally valid contract. The two categories of damages are:

Compensatory Damages:

These damages, which are often referred to as “actual damages,” will compensate you for the loss that you suffered as the non-breaching party. So it goes without saying that to recover these damages, you will have had to suffer some sort of monetarily quantifiable loss due to the other party’s breach of the contract. The amount you will be awarded is meant to make up for the loss resulting from the breach. There are two types of actual damages that you may be able to recover:

General Damages: These damages cover the direct loss suffered by the non-breaching party, and are awarded most often. For instance, imagine that you order some furniture and the furniture company delivers the incorrect style of furniture. When you realized the furniture was not what you ordered or paid for, you demanded the company remove it and deliver the correct furniture, but the company refuses and tell you to live with what they brought, and that they will not refund your money. You could sue for a breach of the sale contract between you and the company, and if the court awarded you general compensatory damages, you’d get the amount of money that you paid for the furniture. The damages could also include things like:

  • reimbursement for any cost you paid to return the furniture back the company, and
  • the amount of any increase in the amount you spent having to then buy the correct furniture, or the closest thing to it, from some other company.

Special Damages: Alternatively, there are special compensatory damages. These are also referred to as “consequential damages,” and will cover any loss you suffered due to the breach of contract so long as the damage or harm is reasonably foreseeable. This refers to actual losses resulting from the contractual breach, but that were suffered as an indirect result of the breach. To get these damages, the non-breaching party has to show that the other party was aware of the possibility of the specific damages at the time the parties entered into the contract.

For example, let’s revisit the furniture scenario discussed above. In this situation, if the furniture company knew that you needed the furniture on a certain day because all your furniture would be picked up and taken to the dump that morning, then the damages for the company’s breaching the agreement would still include all the general damages mentioned above, in addition to:

  • reimbursement for your expense in renting other furniture until you were able to purchase the correct furniture.

Punitive Damages:

These damages are very rarely awarded for a breach of contract, when they are, they are awarded in an effort to punish the breaching party if that party acted willfully, fraudulently, or maliciously when they breached the contract. Punitive damages are different from compensatory damages in that they aren’t intended to reimburse for an actual loss, but rather to punish the breaching party for especially egregious behavior. They may be awarded on top of compensatory damages, though again, it is extremely rare. Generally, punitive damages will be reserved for tort cases resulting in personal injury.

How Does a Court Calculate Compensatory Damages?

Calculating damages will depend on what kind of contract was breached, and what kind of loss was suffered by the non-breaching party. In general, the guidelines are:

The Standard Measure: This measure of damages is the sum that would permit the non-breaching party to purchase a replacement for whatever they would have received had the contract not been breached. If the price of this sort of substitution is hard to determine, the non-breaching party can recover damages for the amount of what they spent or lost to perform their own obligations pursuant to the breached agreement.

Contracts for Goods: When these contracts are breached, damages are calculated by measuring the difference between the price agreed to in the contract, and the market value when the goods are provided or the non-breaching party becomes aware of the breach.

What Are The Limits on Compensatory Damages?

There is one primary limitation on the amount that will be awarded in damages for breach of contract, and that is the obligation of the non-breaching party to mitigate their own damages. This means the non-breaching party is required to minimize the amount of loss they incur as a result of the breach. Damages will not be awarded to cover costs that could have been easily avoided by the non-breaching party, nor does the law aide the lazy. That party’s failure to diligently try to minimize their losses will cause any award of damages to be reduced to by whatever amount could have been avoided with reasonable effort and care. Again, if you’re seeking to recover monetary damages for breach of contract, you should consult with an attorney about your claim.