Terms to Know: Damages

In contract law, if the other party breaches the contract (i.e., doesn’t do what he or she is obligated to do), you will have some costs, losses, or damages. We touched on this briefly when we discussed the limitations of liability. We go deeper on contract damages in the next few blogs.

In contract law, you are entitled to recover the direct damages that are a reasonably foreseeable consequence of the breach. You are not entitled to receive compensation for damages that are not reasonable or are remote. The permitted kinds of damages are known as direct damages.

Contract damages may include:

• Direct damages: The damages that you reasonably expect to arise from the breach in question, without taking into account your special circumstances.

• Incidental damages: Incidental costs are costs that arise due to the breach of the contract. Such costs may include:

  • Inspection of items

  • Transportation or storage of defective items

  • Expenses or commissions incurred in connection with delivery delays

  • Mitigation costs

Often a party is angry at the inconvenience caused by the breach of contract and wants some acknowledgment in the law for the anguish and inconvenience caused by the breach and the process of getting compensated for the breach. A business, however, cannot recover “pain and suffering” damages from a breach of contract; it can collect only those reasonable monetary damages that it can prove.