Damages

Damages are a form of compensation paid to a claimant for suffering loss, injury or harm as a result of another’s breach of an agreement. There are several types of damages that may be claimed in the event of a breach of an agreement: damages for economic loss, reliance damages and expectation damages are three examples. All damages represent an attempt to restore the parties to where they would have been had the breach not occurred. Damages cannot be punitive. Damages for economic loss may be liquidated or unliquidated. Liquidated damages are ‘a genuine pre-estimate of the likely loss’ and represent an attempt by buyers to calculate the economic loss caused by a breach of a contract by a supplier. Many suppliers seek to cap the scale of damages to limit their liability. Unliquidated damages are damages assessed by the courts. Reliance measures seek to compensate the claimant for ‘out of pocket’ expenses incurred due to the other party’s breach. Expectation damages refer to sums that should have been earned in the future had the breach not occurred, for example lost profit. See also Breach of Contract; Damages, Liquidated and Damages, Unliquidated.