Breach in general terms is caused when either of the party does not follow the terms and conditions of the contract signed.So when once a contract is broken there needs to be some compensation for the grieved party(one who has not broken the contract).Thus in order to compensate the loss, Damages are given.Whereas, damages are monetary awards and can include several types:
- COMPENSATORY DAMAGE: These are damages for a monetary amount that is intended to compensate the non-breaching party for losses that result from the breach. The aim is to “make the injured party whole again”. There are two types of compensatory damages:
- Expectation Damages: These are damages that are intended to cover what the injured party expected to receive from the contract. Calculations are usually straightforward as they are based on the contract itself or market values.
- Consequential Damages: These are intended to reimburse the non breaching party for indirect damages other than contractual loss; for example, loss of labor and profits due to an undelivered machine.
- LIQUIDATION DAMAGE: Damages that are specifically stated in the contract. It is based on the mutual consent of both the parties. These are available when damages may be hard to foresee and must be a fair estimate of what damages might be if there is a breach.
- PUNITIVE DAMAGE: These are damages that are intend to punish the breaching party and to deter him or her from committing any future breaches. They are rarely awarded in contract cases, though they may be available in some fraud or tort cases that overlap with contract law.
- NOMINAL DAMAGE: These are damages that are awarded when the injured normally does not actually incur a monetary loss, but the judge wants to show that the winning party was in the right and might want to set an example.
Note: These are typically rarely awarded in contract cases because breaches of contract usually involve some sort of loss to one party.
- RESTITUTION: These are not really legal damages per se, but rather are an equitable solution provided to prevent the breaching party from being unjustly enriched. For example, if one party has delivered goods but the other party has failed to pay, the party that delivered the goods may be entitled to restitution, i.e. the cost of the delivered goods, in order to prevent the unjust enrichment.