What Are Compensatory Damages?

Compensatory damages are monetary awards awarded to a claimant for the purpose of compensating him for any loss or damage. Learn more about compensatory damages, the types of compensatory damages, and how they differ from punitive damages.

Definition and examples of compensatory damages

Compensatory damages are awarded to claimants to compensate for their loss or injury. They include coverage of expenses derived from damages, such as physical injury and breach of contract, or intangible damages, such as emotional suffering and humiliation.

Alternative name: corrective damage or actual damage

The type of reward depends on the type of loss and its effect on the victim. For example, if your job transfer is the result of deliberate discrimination by your employer, the remedy may include back pay or reinstatement of work-related benefits you would have received, such as retirement benefits.

Compensatory damages are intended solely to repair a loss, not to enrich the victim or punish wrongful conduct.

How compensatory damages work

Compensatory damages are among the top three legal remedies for breach of contract or breach of duty. (The others are restitution or restitution of something to its rightful owner, and a court order or disqualification of certain acts).

In civil cases, damages, the amount of money that the law imposes for the violation of some right or breach of duty, is a common remedy. Monetary compensation helps offset losses caused by another person's conduct or breach of a contractual relationship.

A court uses compensatory damages to try to put the victim in the position that she would be in had she not suffered a violation of rights or breach of contract.

The victim or non-offending party cannot always recover compensatory damages, as it is their duty to minimize or mitigate damages to a reasonable extent. In other words, he will not receive compensation for damages that he could have avoided without undue charges or risks.

Types of compensatory damages

General damages
General damages in contract law are damages that cover losses that are direct and immediate consequences of a breach or breach of contract.

Consider this example: ABC Furnitures delivered the wrong office chairs to Apex Limited. Upon discovering the oversight, Apex Limited insists that ABC Furnitures collect the wrong furniture and deliver the correct office chairs.

ABC Furnitures refuses to take the office chairs and says it was unable to provide the proper chairs because they were out of stock. In this case, Apex Limited can sue for breach of contract and receive general damages to cover:

A refund of the money you had paid in advance for the office chairs.
Reimbursement of expenses incurred in the return of office chairs.
Payment for any increase in the cost of purchasing the appropriate office chairs.
In liability law, general damages refer to damages for losses that are difficult to quantify, such as pain and suffering, poor quality of life, disfigurement, and mental anguish.

Special damages

Special or consequential damages cover losses that are not a direct and immediate consequence of a breach of contract.

A breach of contract may be due to special circumstances or conditions that are not foreseeable. To recover damages for this loss, you must show that the offending party was fully aware of the special requirements or circumstances at the time the contract was drawn up.

For example, ABC Company acquires an ERP system from XY Computers. The software malfunctions and ABC Company employees revert to manual processes, spending $ 20,000 in overtime compensation. In that case, ABC can sue to recover the $ 20,000 as indirect damages.

Compensatory damages cover losses resulting from past out-of-pocket expenses, future out-of-pocket expenses, and emotional damage.

In liability law, special damages refer to damages that can be easily quantified, for example, with receipts, invoices, written quotes, or contracts.

Compensatory damages vs. punitive damages

Unlike compensatory damages, which are intended to pay the victim for her loss, punitive damages serve a different purpose. They are given to punish willful misconduct and to prevent wrongdoers and others from engaging in malicious or fraudulent acts in the future.

Punitive damages are not intended to remedy a breach of contract but may be awarded if it is shown that the breach was deliberate.

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Source: LawInfo.com

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