Damages for Breach of Contract

When two parties sign a contract, both parties act under the assumption that the other will adhere to the terms of the agreement. Sometimes, however, one or more party may breach the contract terms. When this occurs, the wronged party has the right to sue for compensation or restitution for the damages that have occurred as a result of the breach.

If you feel you are the victim of a breach of contract, you should contact an experienced California construction attorney at Norton & Associates today.

Types of Damages for Breach of Contract

Breach of contract in the State of California is covered under Civil Code Sections 3300-3302, as well as 3353-3360. Under the law, the main objective of breach of contract damages is to place the aggrieved, or litigating party, in the position they would have been had the contract not been breached.

Consequential Damages

According to the American Bar Association, consequential damages can be defined as:

those damages (a) beyond the direct damages suffered by the non-breaching party, (b) that our reasonable, ordinary, and prudent stranger would not expect, (c) because consequential damages require a more intimate familiarity, not only with the contract itself, but also with: (i) what the non-breaching party has at stake in the contract, and (ii) what fall-out the non-breaching party will suffer if a breach occurs.

Put simply, consequential damages, sometimes referred to as special damages, are damages that are a result of one party failing to live up to their end of a contract. In construction, these damages may include loss of profit or revenue as a result of a construction defect.

Liquidated Damages

Liquidated damages are damages agreed to beforehand and inserted as a clause into a contract. Liquidated damages are to be paid should one of the parties breach the terms of the contract. These damages are generally enforceable, provided the amount agreed upon is deemed reasonable in light of the subject matter and scope of the contract.

Liquidation damages are not permitted or enforceable, however, if:

  •     The requested damages are deemed unreasonable, or disproportionate to the nature of the contract.
  •     Any default on the terms of the contract was only a delay of payment or service.
  •     The damages are deemed a punishment of, rather than compensation by, the breaching party.

Specific Performance Damages

Specific performance is the legal concept that those who have agreed to the terms of a contract, and have signed it, are therefore bound by said terms. Put simply, specific performance are defined as an order by a court that all parties adhere to the exact terms of a contract and meet their ends of the agreement. As specific performance is court-ordered, seeking specific performance damages is generally the last resort in the event of a breach of contract.

Nominal Damages

A much less common type of damages, nominal damages may be awarded when evidence of wrongdoing is found to be present, but any evidence of real financial harm to the injured party is not. As there is no evidence of monetary injury, nominal damages are generally for insignificant sums, usually something like one or two dollars.

Contract Damage Limitations

In most instances, damages for breach of contract are limited by the principles of foreseeability and reasonableness.

Reasonableness

California Civil Code Section 3359 asserts that any damages must be reasonable. This was explained further in case of Brandon & Tibbs v. George Kevorkian Accountancy Corp. in 1990:

The basic object of damages is compensation, and in the law of contracts the theory is that the party injured by a breach should receive as nearly as possible the equivalent of the benefits of performance. The aim is to put the injured party in as good a position as he would have been had performance been rendered as promised. This aim can never be exactly attained yet that is the problem the trial court is required to resolve.

Foreseeability

Foreseeability refers to how foreseeable any damages would have been for a breach at the time of the contract signing. This is also known as the “Hadley Principle,” after the case of Hadley v. Baxendale in English contract law. Simply put, the Hadley Principle limits damages in a breach of contract case to only those damages which can reasonably be anticipated by the nature of the breach. This principle has since been upheld by 43 state supreme courts, as well as the US Supreme Court.

Experienced California Construction Defect and Contract Breach Attorneys

If you feel you are the victim of a breach of contract due to a construction defect, you can file a lawsuit to reclaim any damages you have incurred as a result of the breach.  If you go this route, keep in mind that there are laws in California that impose a time limit on certain lawsuits. The length of time needed to bring a construction defect action against the builder is based on:

  •     The amount of time that has passed since the substantial completion of the property
  •     The nature of the defect
  •     When the property owner discovered the defect

Construction defect and breach of contract regulations in the State of California can be complex, and a law firm that specializes in construction defect litigation can help you understand your rights as a property owner and the timing aspects of filing a lawsuit. Timothy Norton of Norton & Associates has more than 30 years of experience litigating construction defect and breach of contract cases.  Contact Norton & Associates today. We’re here to help.