Types of Damages That May Result From Breach of Contract

Louis Balla
Louis Balla
Louis is the Co-Founder of Anapact and partner at Nuage, a top rated ERP consulting firm based in Venice Beach, California.
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Before going on to talk about breach of contract, let’s first explore what a valid contract actually is. In a nutshell, when at least two parties come to an agreement, they can take out a contract to make it legally binding. Essentially, this document has the terms and conditions of promises that were verbally agreed upon in a more tangible form. It’s also a way to serve as a clear “go-to” later on as to whether or not what was previously agreed upon is being fulfilled in the first place. Needless to say, it will take the signatures of all parties on the final draft for it to become enforceable in the legal sense.

But when the term ‘breach of contract’ comes into play, what does that mean exactly? Read on to learn more about it, including the types of damage that may occur as a result:

Breach of Contract

The word ‘breach’ means a violation of the law, which means that a “breach of contract” is when someone violates terms and conditions on an active contract they’re part of. The other party (or parties) that did not breach the contract can seek damages in that case by way of going to court and filing a lawsuit.

When a contract is breached, that can mean a number of things. This is because the term is an umbrella that covers multiple breach types, such as:

  • Anticipatory Breach – In this case, the breaching party discloses either blatantly or otherwise to the non-breaching party that they’re not going to honor the contract that was signed.
  • Minor (Partial) Breach – Sometimes, the breaching party will have completed at least half if not most of the contract. However, there will be a minor condition (or two) that was not fulfilled. This can be something as minute as an error in pricing or otherwise.
  • Material (Total) Breach – When the actions of the breaching party are at this point, performing their end of the deal in the contract is impossible. At that stage, filing a lawsuit becomes well within the rights of the non-breaching party for reparations.

The Damage

The non-breaching party that files the case must include a detailed description of the damages they’re seeking. However, what type of damages they will actually receive is still essentially the court’s decision. A crucial factor that tends to overshadow all others is whether the breach is major or minor. The damages will be based largely on their weight based on that. Usually, monetary damages are awarded as the legal remedy. However, there are other possible damages and remedies, such as the following:

  • Compensatory – As the name suggests, this leads to reimbursement of financial losses by the non-breaching party.
  • Liquidated – Depending on the contract, there can be a liquidated damages clause involved. In those instances, a pre-set amount for damages is established.
  • Nominal – These damages are symbolic and less of a compensation. At times, the damages can be as low as a dollar.
  • Quantum Meruit – Latin phrase essentially translating to “what one has earned”. This legal action is used for recovering the value of services performed as is deemed reasonable.
  • Restitution – This is meant to help an injured party return to the way they were prior to the contract.

Conclusion

A contract is a valid and legally binding agreement between two or more parties. Breaching a contract simply means violating the law through either anticipatory, major, or minor actions. Damages that could result from this include compensatory, liquidated, and nominal.

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- About the Author

Louis Balla
Louis Balla
Louis is the Co-Founder of Anapact and partner at Nuage, a top rated ERP consulting firm based in Venice Beach, California.