What Are Damages for a Breach of Contract?

What Are Damages for a Breach of Contract?

Contracts are fundamental to business relationships. They set the standards, terms, and conditions of a business transaction or project so that all parties understand their obligations, rights, and responsibilities. Unfortunately, there can be situations where one party cannot fulfill their obligations or responsibilities, which may result in a breach of contract. If the other party is significantly impacted by a breach, there are damages that they can pursue as a remedy.

This article will explore the different types of damages that a party can receive as a result of dispute resolution. Please note that these discussions of breach of contract in business law are based on Australian legislation.

What is a breach of contract?

A breach of contract occurs when one or more parties to a contract or agreement fail to meet an obligation. This could include failure to deliver a product on time, delivering defective or incorrect products or services, or late payment for a service. There can be cases where the breach is immaterial. That is, the failure is inconsequential in that it does not cause significant harm to the other party. However, if the breach is material whereby there is a significant impact on the other party, that party could demand damages to compensate them for their losses from such breach.

What are the damages for a breach of contract?

Basically, damages are another name for the award that a party is given as recompense for any losses or damages they incurred due to another’s breach of contract. This could be determined by a court through litigation or a tribunal in arbitration.

The underlying contract may set out penalties and damages for certain types of breaches. It is possible that the amount estimated ends up being more than the actual breach, but that would still be the amount due. These would be called agreed damages. Otherwise, the injured party would have to prove to a court or tribunal that the breach was material and how much the loss was from that breach.

How do you claim damages?

Typically, to claim damages, a party would have to prove there is a reasonable connection between the breach and the loss that is demanded. For example, part of the process may include proving that the breach was material and that the injured party did not do anything to exacerbate the situation or to accept the breach, thereby implying that they were not actually injured and did not suffer any material losses.

What are the different types of damages?

When discussing damages, specifically under Australian law, there are several different types, including:

• Compensatory damages: Considered the most common form of damages, this endeavors to make the injured party whole. That is, pay any losses to return the party back to where they were before the breach.
• Nominal damages: This occurs when a breach has been determined to have occurred, but the court or tribunal determines that no real loss was suffered. This is often a minimal amount that is more symbolic of the breach.
• Expectation damages: While compensatory damages aim to return a party to a previous whole state, expectation damages are to bring the injured party to the state they would be in if the breaching party did not breach and completed their responsibilities.
• Liquidated damages: These damages are amounts that the parties agree to in the contract. This would be the amount owed if a breach of contract occurs.
• Loss of chance or opportunity losses: Like expectation damages, loss of chance or opportunity losses are damages for profits that the injured party would have had the opportunity to reap if the contract was completed as agreed, without the breach.
• Reliance losses: As the name suggests, this type of damages is when the injured party spent resources and expenses only to have another party breach. An example, spending time to build a stage for a concert only for the performers to cancel. The injured party could demand compensation for the time and money spent building that stage.

THAC are breach of contract experts.

Avoiding a breach of contract can be simple or complex, depending on the advice and experience that go into negotiating and drafting contracts and business agreements. Thailand Arbitration Center (THAC) is a world-class resource for resolving disputes arising from contract breaches. THAC can offer guidance at every stage, from drafting dispute resolution clauses to settle breaches of contracts to assisting in ADR proceedings triggered by breaches.

THAC provides dispute resolution center services that meet or exceed international standards. Parties can find assistance with model clauses for arbitration or mediation agreements, ADR professionals with subject-matter expertise to act as mediators or arbitrators, and state-of-the-art facilities with full administrative support. In addition, THAC is conveniently located and well-equipped for in-person and remote hearings. For those seeking online dispute resolution, THAC has various solutions, including the innovative Talk DD platform.