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As a business owner or employee, you may have encountered a breach of contract at some point. A breach of contract occurs when one party fails to fulfill their duties as outlined in a legally binding agreement. This can lead to financial losses and other damages for the non-breaching party. But what is the measure of damages for breach of contract?
There are several types of damages that may be awarded in a breach of contract case. The most common types of damages are compensatory damages, which are intended to compensate the non-breaching party for losses incurred as a result of the breach. Compensatory damages can be broken down into two categories: direct damages and consequential damages.
Direct damages are losses that directly result from the breach of contract. For example, if a contract for the sale of goods is breached, the non-breaching party may be entitled to recover the direct damages resulting from the breach, such as the cost of the goods. Similarly, if a contract for services is breached, the non-breaching party may be entitled to recover the direct damages resulting from the breach, such as the cost of hiring someone else to perform the services.
Consequential damages, on the other hand, are losses that are not a direct result of the breach, but rather a consequence of the breach. For example, if a breach of contract causes the non-breaching party to lose a business opportunity, the non-breaching party may be entitled to recover the consequential damages resulting from the breach, such as lost profits.
Another type of damages that may be awarded in a breach of contract case is liquidated damages. Liquidated damages are damages that are specified in the contract in advance of any breach occurring. For example, a construction contract may specify a certain amount of liquidated damages per day for each day that the project is delayed beyond the agreed-upon completion date.
Finally, there are punitive damages, which are intended to punish the breaching party for their wrongful conduct. Punitive damages are not awarded in every breach of contract case, and are typically only awarded in cases involving egregious conduct.
In summary, the measure of damages for breach of contract varies depending on the specific circumstances of the case. However, compensatory damages, which can be either direct or consequential, are the most common form of damages awarded in breach of contract cases. Liquidated damages and punitive damages may also be awarded in certain cases.