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Limitations on recovery for breach of contract

On Behalf of | Apr 8, 2021 | Blog

A breach of contract can result in significant inconvenience to the injured party. It can also result in a substantial monetary loss.

Individuals or businesses on the receiving end of a contract breach may wish to punish the breaching party and right the wrongs against them via a breach of contract claim. While the law entitles injured parties to pursue recovery, it does place limitations on the types of damages they may recover.

Damages commonly awarded in breach of contract cases

If a claimant can prove that a breach of contract did occur, he or she may recover several types of damages. According to the Judicial Education Center, those damages typically fall into one of two categories: general and special.

General damages are the most common type of damage awarded in breach of contract cases. These types of damages cover the losses an injured party incurred necessarily and directly as a result of the breach. Special damages — or “consequential damages” — refer to damages the courts award for losses incurred as a result of special conditions or circumstances that one could not ordinarily foresee.

Limitations on damage recovery

According to California State University Northridge, three principles limit injured parties’ recovery in contract dispute cases. Those three principles are as follows:

  • Parties can only recover damages for losses they can prove with reasonable certainty. The courts will not award compensation for speculative damages.
  • Injured parties can only recover damages for losses they could foresee at the time of signing the contract. “Foreseeable damages” are those that parties can reasonably anticipate as a result of a breach, or that the breaching party knew would be likely given the circumstances of the parties at the time they entered into the contract.
  • Injured parties have a legal obligation to mitigate (minimize or avoid) damages. The courts will not allow plaintiffs to recover for damages they could have easily avoided through reasonable efforts.

These three principles help courts avoid awarding excessive damages.

 

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