Legal Solutions

Compensatory damages following breach of contract

On Behalf of | Nov 15, 2021 | Business Law

Contracts form the backbone of many business dealings in Texas. Unfortunately, sometimes one party to the agreement will not follow through on their obligations leading to a contract dispute that leaves the nonbreaching party in a tight financial bind that affects their business operations. Sometimes the situation requires the nonbreaching party to file a breach of contract lawsuit. Depending on the circumstances, the nonbreaching party may seek one of the following types of compensatory damages: general damages and special damages.

General Damages

General damages are in place to cover the direct losses that the nonbreaching party was forced to incur due to the breach. Most compensatory damage awards are for general damages. General damages can include a refund for any amount they already paid for the product contracted for, a reimbursement for the costs they incurred in sending the wrong product back to the breaching party and the cost increase of what it took for the nonbreaching party to purchase the right product from someone else based on what they would have paid had the nonbreaching party followed through on the agreement.

Special damages

Special damages are also referred to as “consequential damages.” The nonbreaching party may be awarded special damages if their losses were not ordinarily predictable due to special circumstances. To put it another way, special damages are for actual losses that were not suffered in a direct and immediate way. Special damages may only be awarded if the nonbreaching party can show that the breaching party was aware of these special circumstances at the time that they entered the agreement with the nonbreaching party.

Other damages may also be sought

This post only covers compensatory damages that might be sought in a breach of contract case and cannot promise any specific result in your case. In addition to compensatory damages, other damages such as specific performance, rescission and restitution may be sought under the right circumstances. What is important to take away is that remedies are available that, should a lawsuit be successful, can help the nonbreaching party become whole again.