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How are damages awarded after a contract breach?

On Behalf of | Apr 26, 2023 | Contract Disputes

If a court decides that one party to a contract is guilty of breaching it, they will often award the other party damages for whatever losses they have suffered.

There are several ways they can calculate this. They include:

Going by what the contract says

Some people pre-agree a figure for a breach when they first make the contract. These are known as liquidated damages. So it always pays to review your contract when problems occur, especially if it was made before you joined the business.

Compensating the other party

Company A breaches the contract with Company B. The court will look to estimate where Company B would have been today if it weren’t for that breach. Company A then needs to make up that difference.

Punishing the party that breached the agreement

This is not a commonly used option in the business world, but a court does reserve the right to fine the offending party for their behavior. It would come on top of any compensation.

Awarding a token amount

Company A broke the agreement, but the breach did have any financial effect on Company B. In this case, a court may award nominal damages. As with most things in the business world, there is a lot of room for maneuver and interpretation. Sometimes, a court might decide that damages alone are insufficient and order the offending party to pay other types of payments.

If you are in dispute over a construction contract breach, consider legal help to understand more about how the law works and examine what steps to take.