A Project of National Paralegal College,
a Division of Crestpoint University

TAKE COLLEGE-LEVEL COURSES WITH
LAWSHELF FOR ONLY $20 A CREDIT!

LawShelf courses have been evaluated and recommended for college credit by the National College Credit Recommendation Service (NCCRS), and may be eligible to transfer to over 1,300 colleges and universities.

We also have established a growing list of partner colleges that guarantee LawShelf credit transfers, including Excelsior University, Thomas Edison State University, University of Maryland Global Campus, Purdue University Global, and Southern New Hampshire University.

GET STARTED TODAY!

Purchase a course multi-pack for yourself or a friend and save up to 50%!
5-COURSE
MULTI-PACK
$180
10-COURSE
MULTI-PACK
$300
Accelerated
1-year bachelor's
program

Other Forms of Damages


See Also:

Video-Course: Performance and Breach -Module 5 of 5
Video-Course: Remedies - Module 5 of 5

Terms:

Nominal Damages:
Token damages awarded in order to acknowledge that the injured party has been injured.

Liquidated Damages:
Damage amounts that are negotiated by the parties beforehand so that, in the event of a breach, the contract itself states how much damages the injured party can recover.

Punitive Damages:
Damages awarded by the court to punish the defendant. They are awarded when the defendant has acted with recklessness, malice or deceit and have nothing to do with the actual losses incurred by the plaintiff.


In addition to the basic measure of damages, there are several other measures of damages:

  1. nominal damages,
  2. liquidated damages and,
  3. punitive damages.

Nominal Damages

Nominal damages are token damages whose purpose is only to acknowledge that the injured party has been injured. For example:

Exotic Elixirs is a fledgling juice company that is trying to get its business off the ground. Exotic orders expensive juicing machinery from AgraTech and signs contracts with several different fruit growers to supply them with ingredients. AgraTech fails to deliver the machinery and, because Exotic cannot meet its demands, Exotic’s customers take their business elsewhere. As a result, Exotic goes out of business three months after opening. If Exotic sues AgraTech for lost profits and the court cannot determine with reasonable certainty what those lost profits were, it is likely that nominal damages, of perhaps $1 will be awarded as a token acknowledgement that Exotic was harmed.

Liquidated Damages

Liquidated damages are damage amounts that are negotiated by the parties beforehand so that, in the event of a breach, the contract itself states how much damages the injured party can recover. For example:

Ramon Garcia and the Boston Red Sox enter into a contract under which Garcia agrees to play for the team for one year and the team agrees to pay Garcia $500,000. The contract also says that if the Red Sox breach the contract, they will be liable for $100,000 in damages. The $100,000 in damages provided for in the contract in the event of a breach are liquidated damages.

In order for a provision that establishes damages to be valid, it must meet two requirements.

First, at the time the contract is made, actual damages must be difficult to calculate and, second, the amount of damages established in the contract must be a reasonable forecast of what damages would have been. For example:

Exotic Elixirs is a fledgling juice company that is trying to get its business off the ground. Exotic orders expensive juicing machinery from AgraTech and, under the contract, AgraTech agrees to be pay Exotic $50,000 in damages if AgraTech breaches the contract. AgraTech fails to deliver the machinery and, because Exotic cannot meet its demands, Exotic’s customers take their business elsewhere. In this case, liquidated damages will likely be upheld. First, as we said earlier, lost profits of a new business are very difficult to calculate and so, the first element required for validating liquidated damages is met. Therefore, if the court determines that $50,000 was a reasonable forecast of the damages Elixir would suffer as a result of the breach, the liquidated damages clause would be valid and AgraTech would be liable for the $50,000.

Punitive Damages

The general rule is that an injured party cannot recover punitive damages for breach of contract. See General Motors Corp. v. Piskor, 281 Md. 627 (1977).

However, there are two exceptions to this rule. The first exception involves torts in that, if the action breaching the contract is a tort in and of itself, punitive damages can be recovered. The second exception involves bad faith, in that punitive damages can be recovered for a breach done in bad faith.