Types of Damages in Contract Law

The term damages is to be understood as Compensation. Whenever one of the party in the Contract comes across breach of Contract, the other party has some rights. Out of those rights, they has the right to sue for damages i.e. damages for breach of contract. The objective of court in arranging for compensation is to bring the situation as if there is no Contract between the parties. The following are different types of damages in contract law.

  1. General Damages
  2. Specific Damages
  3. Nominal Damages
  4. Vindictive Damages
  5. Liquidated Damages.

General Damages

The loss arising out of breach of Contract Can be divided into two parts, namely direct loss and indirect loss. If only direct loss is compensated it is called general damages.
  • A case on this Point is Hobbs Vs London and South Western Railway Company. In this case Mr. A Travels by train along with his wife, to reach a particular destination. On account of main repair, the train gets stopped. Then it becomes inevitable choice to go on Foot. Thus they have taken risk physically. In the mean by, it rains heavily and A`s wife gets caught by cough and cold. A files a Suit on Railway Company claiming compensation for physical risk as well as illness. Here physical risk is direct loss and illness is indirect loss. Court decides only general damages here.

Specific Damages

In case where indirect loss also is Compensated besides loss, it is called Specific Damages. To get specific damages, concerned special situation must be communicated.
  • A case on this point is Simpson Vs London and North Western Railway Company. In this case Mr. A is a farmer he wants to sell his agriculture products in an agricultural fair which is going on at a particular place. For the purpose of transportation, A handover his agricultural Products to a Railway Company. While making delivery to the Railway Company, he gives clear instructions to the same in connection with transportation, without any delay. But, the Railway Company makes delay and the goods reach the destination after closure of fair. A claims Compensation to inconvenience which is direct loss. And also loss of profit which is indirect loss. A`s special situation is Communicated, Court arranges for specific damages.

Nominal Damages

At times, on account of breach of Contract, the other party may not come across any loss. Though it is the situation, the other party can file a Suit. Then Court decides a very little amount of Compensation. It is called nominal damages. Generally this type of damages will be fixed in case of anticipatory breach.

Vindictive Damages

It is otherwise known as penalty damages. Here Contract will be breached by one of the parties and the other party comes across heavy suffering which cannot pressured in the form of money. Then Court decides heavy amount as Compensation. This type of damages will be decided on the following occasions.

Breach of marriage agreements and Wrongful dishonor of Cheque by banker.
  • A case on this point is David Son Vs Barclays Bank. In this case Mr. A is a book seller and he is customer of Barclays Bank. On one day he issued a cheque amounting to 2 pounds, to one of his Creditors. But the Banker dishonors the cheque negligently though there is sufficient credit to his account. As a result A`s business as well as personal reputation gets destructed. There after A files a Suit and gets penalty damages amounting to 250 pounds, from his banker.

Liquidated Damages

It is otherwise known as predetermined damages. The terms of Contract determine the amount of Compensation.
  • A case on this point is Dunlop Pnumatic Tyre Company Vs New Garage and motor Company. In this case there is a Contract of agency between DNT Company and NGM Company where DNT Company is Principle and NGM Company is its agent. Per the terms of their Contract if NGM Company sells goods below the listed Price, NGM Company has to pay five pound per unit thus sold. Two units are sold below Specified Price. Court arranges for 10 pounds as determined by Contract.