7 Types of Damages for a Breach of Contract
A contract is a legal agreement between two or more parties that the law permits to be enforceable. To create a contract, one party needs to make an offer with terms and conditions that are accepted by the other party and include the exchange of consideration between the individuals or parties involved in the contract. When one party fails to fulfill any part of the agreed-upon terms, they are in breach of the contract.
Are you a victim of a breach of contract and do not know what to do about it? Do you want to know about the different types of breaches of contracts and the types of damages you can claim?
At the Frank Law Firm, our team of experienced attorneys are experts at contract law. Here, we have put together a guide to help you learn about a breach of contract and the types of damages you can seek.
What Is a Breach of Contract?
A valid contract enforceable by the law is an agreement that legally binds the two or more parties involved in its formation to fulfilling its terms. The main purpose of a contract is to provide guidance to all contracting parties by outlining specific terms and conditions of the promises they negotiated and agreed to during the formation of the contract.
Moreover, a contract ensures that all contracted parties adhere to terms and conditions in delivering what they promised. The terms and conditions listed in the contract become legally enforceable after all parties involved in the contract sign the final draft. Once the contract is signed, any failure to complete the terms of the contract can be met with a legal remedy.
The term “breach of contract” refers to an action or cause of action that results in one of the contracted parties violating the terms and conditions listed in the contract.
For example, if one party fails to fulfill a promise they made in the contract, which affects the other party’s ability to fulfill their part or they suffer actual harm, it may be termed a breach of contract. The non-breaching party or injured party can seek damages by filing a breach of contract lawsuit against the party at fault.
Common Types of Breach of Contract Actions in New York
A contracted party can breach an agreement in multiple ways. However, not all types of breaches are treated the same under the law. Below we’ve listed some examples of different types of breaches of contracts and the possible legal consequences each type can bring.
Total or Material Breach
A total breach of contract occurs when the breach affects all contracted parties to a large extent, resulting in the other parties failing to fulfill their contractual obligations.
In the event of a material breach, the aggrieved party is entitled to stop delivering or performing their obligations under the contract. Moreover, they can file a lawsuit against the party that originally breached the contract.
Minor or Impartial Breach
A minor or impartial breach happens when one of the parties fails to perform a part of the contract. An impartial breach is so small and insignificant that it does not prevent the parties from fulfilling the other contractual obligations.
In the event of a minor breach, the non-breaching party must continue to deliver or fulfill their contractual obligations. However, they may sue the breaching party for any damages incurred from the breach.
Anticipatory Repudiation or Anticipatory Breach
An anticipatory repudiation arises when one of the contracted parties indicates or tells the other party, using actions or words, that they’ll not be able to fulfill or deliver on the promises made in the contract.
In the instance of an anticipatory repudiation, the non-breaching party may avoid incurring additional expenses or costs with this forewarning. If the non-breaching party fails to reduce their costs, they may be able to recover some damages from the breaching party.
Besides these three types of contract breaches, a contract can be breached if it is fraudulent or was not formed legally. In addition, a contract may be breached if it contains unconscionable subject matter or when there is a unilateral or mutual mistake regarding a material fact in the contract.
7 Types of Damages for Breach of Contract
When a breach of contract occurs, the non-breaching party becomes eligible to seek damages, as per New York law.
While the plaintiff can specify different types of damages in their complaint, the ultimate decision is up to the court, and the judge or jury will decide what damages and amounts the plaintiff should receive.
One thing that the court takes into consideration is the type of breach of contract, such as an impartial or total breach. The most common types of damages awarded to a non-breaching party are compensatory, liquidated, punitive, and ordinary damages.
Below we will discuss each damage in detail to help you understand them better:
These are a type of monetary damages awarded to the non-breaching party for the losses they suffered because of the breach of contract.
These damages are meant to restore the non-breaching party to the position they would have been in if there was no breach of contract or if the breaching party had fulfilled their contractual obligations.
Suppose party X promises to pay $10,000 to party Y for construction services, but party X breaches the contract by not using the services or not paying the promised amount. This breach of contract will make party Y entitled to $10,000 in compensation.
On the other hand, if party Y fails to deliver the services and party X hires a different contractor for $12,000, party Y would be obligated to pay the $2,000 difference in the contract fee.
Compensatory damages are further classified into two categories: expectation damages and consequential damages.
Expectation damages cover what the non-breaching party or the plaintiff expected to obtain from the contract. Generally, the terms and conditions of the contract are used to calculate the damages to be awarded to the non-breaching party.
Consequential damages are designed to reimburse the non-breaching party for any damages they suffered outside of what was covered in the contract. This may include loss of business deals or loss of reputation due to the breach of contract.
These types of damages are explicitly listed in the contract. Typically, liquidated damages are included in a contract when the parties can make an estimate of the potential damages they will incur in the event of a breach of contract. The parties involved in the contract will agree to the liquidated damages provision that includes a set amount.
For example, suppose party X gives a contract to party Y for constructing a building on or before a specific date. They could include a liquidated damages clause in the contract that party Y must pay a specific sum for each day longer than the stipulated date it takes to complete the construction.
The liquidation amount should be reasonable, depending on the type of contract and the total cost involved. Courts tend to be hesitant to award liquidated damages they deem to be excessive.
Punitive damages go beyond actual damages. They require the breaching party to give the injured party money in addition to the costs they incurred as a result of the breach of contract.
These damages are designed to punish the breaching party and deter them from re-committing offensive and outrageous actions that can cause financial or other types of harm to others.
Although rarely granted, punitive damages can be awarded in cases of breach of contract in New York if the breaching party behaves remarkably maliciously or recklessly. In order to receive punitive damages, the plaintiff must have acted morally and in accordance with the terms and conditions listed in the contract.
General or Ordinary Damages
These damages are a result of natural, ordinary, or probable course of events that can result in a breach of contract.
Suppose party X agrees to sell cardboard to party Y at $50 per unit with the payment being made after the delivery. Then the market price rises to $60 and party X refuses to deliver anything for less. If party Y decides they need the cardboard and just pays the price or they buy cardboard from some other vendor at $60, they are eligible to claim the damages of $10 per unit of cardboard from party X.
Unlike compensatory damages, nominal damages don’t involve a huge sum of money. In fact, these damages are meant to be a symbol of victory rather than any type of compensation.
If the breach of contract does not harm the non-breaching party, but they still want the breaching party to be held accountable, then nominal damages may be awarded by the court. Nominal damages represent a symbolic victory and are simply a matter of principle.
Remedies in Equity or Equitable Remedies
In some specific cases, compensatory damages may be judged insufficient to compensate the aggrieved party. The court may award equitable remedies for such cases.
Remedies in equity involve the court ordering the contract parties to act or not act in a certain way. These ways may include:
It requires the parties to rewrite the contract to reflect their true intent.
It requires the parties to cancel the old contract and form a new one with a set of new terms and conditions.
It may force the at-fault party to perform their end of the contract.
Quantum meruit is a Latin phrase that translates into “what one has earned.” This type of damage requires the at-fault party to pay for any services completed before the breach of contract. In simple words, a breaching party is responsible for paying for the services or products of the non-breaching party from before they breached the contract.
Defenses for Breach of Contract
Sometimes, a breach of contract occurs due to factors out of the control of the breaching party. In such cases, they can use defenses for breaching a contract to avoid having to pay any legal compensatory damages.
Common defenses include:
If the contracted parties misunderstand the intent of the terms of the contract, leading to confusion and mutual mistakes.
If the at-fault party did not have the financial or mental capacity to enter into a contract when the contract was signed. In this case, the court can void the contract.
If the breaching party was forced into a contract under duress, the court can void the contract.
If the breaching party was misled at the time of signing the contract, they could use a fraud defense.
Contracts that outline illegal activities, including theft, are not enforceable in a court of law.
If one party receives far more benefits from a contract than the other party, the court can deem it void.
What Do You Need to Prove to Win a Breach of Contract Case in NY?
Under New York law, the plaintiff or aggrieved party must prove these four elements in order to establish a breach of contract claim against anyone.
The elements are:
- The existence of the contract. It could be a written document or another form of contract that is enforceable in a court of law.
- The plaintiff’s performance of the terms of the contract, or some sensible justification for non-performance.
- The defendant’s failure to perform the terms of the contract or the defendant’s violation of terms and conditions outlined in the contract.
- The plaintiff suffered damages as a result of the breach of contract by the defendant.
Failure to prove any of these elements can mean the dismissal of a contract breach claim. Therefore, it’s important for the plaintiff to have the best litigation lawyers by their side to help them prove their claim and argue their case.
At the Frank Law Firm, we are a team of experienced lawyers that have handled numerous breach of contract cases. Our attorneys can assist you in filing a lawsuit against the breaching party to help you seek legal remedies and claim fair compensation for the damages you suffered due to the breach.
Common Issues in Winning a Breach of Contract Claim in New York
Winning a breach of contract claim can be impossible if the aggrieved party does the following things:
Fails to Prove that the Parties Entered into a Contract with Mutual Understanding
If the defendant proves that the aggrieved party forced them into a contract or deliberately misled them about the terms, the case might be dismissed. They could also argue that the contract was confusing or written poorly.
Fails to Reduce the Agreement to Writing
New York’s Statute of Frauds provides a list of things that, unless written, will be void. If the type of agreement the plaintiff and the at-fault party agreed to comes under the list provided by New York’s Statute of Frauds and there is no written contract, it may be deemed void by the court.
The Frank Law Firm Is Here to Take on Your Breach of Contract Case
Breach of contract and corporate dispute cases over contracts are complex and require the services of expert contract law attorneys. The Frank Law Firm is here for you. If you are a victim of a breach of contract and suffered damages due to the breach, let our seasoned lawyers help you get the compensation you deserve.
We put great effort into every case and don’t hesitate to go above and beyond for our clients. Our attorneys will thoroughly study your case, collect the required evidence, and help you file a lawsuit against the breaching party. They will then either negotiate with the other party and reach a settlement agreement or they will take your case to court and argue on your behalf.
Call us now at 516-246-5577 to discuss your case or contact us online. Our team of knowledgeable lawyers and dedicated staff will work diligently to help you get the best possible outcome in your breach of contract case.