Chapter 19 Nature of damages for breach of contract

Damages for breach of contract are compensatory by nature. Damages for breach are intended to put the claimant back in the same position as if the requirements of the contract had been performed.

Compensatory damages may be claimed under a number of categories of damage including losses for:

  • expectation loss: the loss of the expectation or profit the claimant was entitled to under the contract. It usually does not include non-economic losses (although there are some exceptions);
  • reliance loss: loss for expenditure incurred in reliance on the defendant’s promise but wasted because of the defaulting party’s breach;
  • restitution: the value of any benefits that the claimant has conferred on the defaulting party as a result of performance, in whole or in part, of the contract; and
  • reimbursement: the expenditure of money incurred by the claimant as a result of the defaulting party’s breach (for example, money paid to a third party for repair work).

More than one element of compensatory damage may be claimed, although common law rules will continue to apply. A consequence of the compensatory nature of damages is that a claimant may not be put into a position superior to that which the claimant would have been in had the contract been performed.

Calculation of an award of damages for breach of contract does not include an element for punishing a defaulting party, unlike other areas of law (eg tortwhere damages may also include an amount which is exemplary or punitive in nature).