The Types of Damages Available in Louisiana Contract Disputes
This article provides a brief analysis of the types of damages available in contract disputes arising in Louisiana.
What is a contract?Contracts are an integral part of business and life. Virtually everyone is involved in some sort of contractual agreement, whether it is an agreement to pay for and use utility services, contracts with suppliers or vendors, or leases or mortgages on property. Contracts are entered into when two or more parties agree to legally be bound by an agreement. If one of the parties breaches the contract or does something that is counter to what was agreed upon in the contract, the other party to the contract is harmed and should be compensated with damages.
The Types of Damages In Contract Dispute CasesThere are four main types of damages for contract disputes in Louisiana. These include:
1. Compensatory Damages. The purpose of compensatory damages in a contract dispute is to restore the parties to their pre-contract position. To say this another way, the goal of damages in a contract dispute is to make the parties whole again, as if the contract never happened in the first place.
2. Liquidated Damages. Sometimes contracts contain clauses directed to liquidated damages, i.e., the agreed upon amount of damages in the event that the contract is breached. Liquidated damages are often closely tied to what actual damages would be in the event that the contract is breached.
3. Nominal Damages. Even if the contract was breached and neither party really suffered any real harm as a result of the breach, nominal damages can be sought for the technical breach of the contract. Nominal damages are infrequently awarded as they are usually small amounts of money. Rather, nominal damages are more often awarded simply to demonstrate that the non-breaching party to the contract was in the right.
4. Punitive Damages. Punitive damages are a form of damages that are meant to be a punishment for the party who breached or caused the contract dispute. A punitive damages award goes above and beyond what the injured party needs to be restored to its pre-contract position. Courts rarely award punitive damages in contract dispute cases, but it is not unheard of.
Damages Are Not The Only Recourse In Contract DisputesIn addition to, or in the alternative, there are other remedy options available in the event that a contract dispute arises between the contracting parties. Other remedies that are common in contract dispute cases include:
1. Restitution. Restitution is monetary damages that are calculated based on the defendant's gains from the breached contract, rather than based on the plaintiff's losses because of the breached contract. To think of this another way, restitution is a forfeiture of the gains to the injured party in a breached contract situation.
2. Cancellation of the contract. When a contract is canceled, both parties walk away as if the contract never existed.
3. Specific performance. Specific performance requires completion of the contract or a specific act as a remedy to a breached contract. Specific performance is court-ordered.