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If you are running a business, you may end up in a dispute regarding a breach of your contract. This can sometimes end up in a court case, where a judge will make an award for damages in your favour. This article will explain some of the different types of damages that you can expect if you take your case to court.
What are Damages?
Simply put, damages is the legal term for compensation. This area of law can be confusing in the terminology. For example, one type of damages is called ‘compensatory damages’.
As a result, it is better to understand that the word ‘damages’ refers to the award a judge will make for your dispute. Usually, this is in the form of monetary payment.
When Can I Get Damages?
For a judge to be able to consider and award damages, you will usually need to take your case to court. This can be costly and lengthy and negatively impact your business’s cash flow. As a result, it is usually a good idea to attempt to negotiate a settlement, or pursue alternative dispute resolution. You can hire a professional mediator to help both parties reach a mutually workable solution.
If this does not work, however, you can take your case to court if you have suffered a breach of contract. As a general rule, contractual damages are available through legal action in English law if one of the contracting parties has broken a term of that contract. The breach of contractual obligations must have caused a loss, primarily financial. If a minor breach occurs, you can receive nominal damages. However, nominal damages are usually small and may not be worth going to court for.
The damages you will get will depend on the breach and the financial loss you have experienced. For example, you can receive:
- expectation damages;
- consequential damages; and
- performance or reliance damages.
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Expectation Damages
Expectation damages compensate you for the difference between what you expected in the contract and what you actually received. In other words, it will put you in the same position you would have been in if not for the contract’s breach.
This is usually straightforward arithmetic. It is worth remembering, however, that in some commercial contracts, there may be a specific clause outlining the amount of money each party will receive if a certain term is breached. If this is the case, a court may award you that money instead of determining how much the other party owes you in expectation damages
Consequential Damages
Consequential damages go beyond your expectations in the contract. These damages aim to compensate you for losses due to the breach. For example, by pleading for consequential damages, you could be compensated for a loss of profits resulting from the breach of contract.
Sometimes, the other contracting party’s lawyers may try to argue that your consequential damages were unforeseeable. This would make it so that you cannot recover for those damages. Because of this, you should seek legal advice before deciding whether to take your case to court or not.
Performance or Reliance Damages
Performance damages or reliance damages both have a similar aim. These apply when you have a contract for a service to be provided to you, but the service is provided in a way that causes you some type of loss. If this loss can be fixed, then performance damages may be available to cover the cost of repairing the defective performance.
Similarly, reliance damages will compensate you for any financial loss you incur because you relied on the contract.
Other Forms of Damages
Other, less common types of damages exist within contract law, such as punitive damages. These are only used in very exceptional situations. You may also wish to look at other types of remedies within contract law, such as specific performance.
Key Takeaways
If you are a business owner considering taking your case to court, it is important to know what compensatory damages a court can grant you. The main types are expectation damages, consequential damages, and performance damages. A lawyer can tell you which types of compensation you will likely be awarded if your case is successful.
If you have any questions about damages, LegalVision’s experienced dispute resolution lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Damages are an award made by the court that reflects the loss you have suffered from the other parties contractual breach.
Expectation damages will put you in the same position you would have been in had the breach of contract not happened.
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