What are the Available Damages in a California Breach of Contract Case?

A contract is an agreement between two parties for mutually enforceable obligations. For example, a contract is created when one person agrees to sell a good to another person, who agrees in turn to pay for that good. A contract could obligate a party to perform an action or service, to provide a good, to lease or convey title to real property, or to refrain from taking certain actions.

When one party to a contract fails to fulfill their contractual obligations, they may be liable for damages for breach of contract. California law provides multiple methods for calculating damages. This remedy involves a monetary award to the aggrieved party, although in some cases a party might seek a court order-often called an injunction-directing a defendant to fulfill the terms of the contract. Breach of contract is a very common claim in business litigation, since most business activities rely on contractual relationships.

Measuring Damages for Breach of Contract

The goal of a breach of contract lawsuit, according to both the California Legislature and the California Supreme Court, is to put a plaintiff in the position in which they would have been had the breach not occurred. Section 3300 of the California Civil Code states that damages should consist of “the amount which will compensate the [plaintiff] for all the detriment proximately caused” by the defendant’s breach, or the amount that, “in the ordinary course of things, would be likely to result therefrom.”

The California Supreme Court expressed a similar view in Lewis Jorge Mgt. v. Pomona Unif. Sch. Dist. (2004), ruling that damages should “seek to approximate the agreed-upon performance” and “put the plaintiff in as good a position as he or she would have occupied” but for the defendant’s breach of the contract.

Understanding the Differences Between General and Special Damages

California recognizes two main types of damages for breach of contract. These are general damages and special damages.

General damages, also known as “consequential damages,” are the natural and foreseeable results of a breach. A common example occurs in real estate leases. If a tenant signs a one-year lease, but the tenant vacates the premises and stops paying rent after six months, the landlord loses rental income. The damages owed to the landlord would be the rent for the period of time between the original tenant’s breach and either (1) the end of the lease term or (2) the beginning of a new lease with a replacement tenant, whichever of these happens sooner. Many lease agreements include a specific penalty for a breach by a tenant, which is an example of liquidated damages, discussed further below.

Special damages, or “incidental damages,” are also caused by the breach, but rather than being the natural consequences of any breach of that type, they are dependent on specific circumstances. Special damages might include expenses incurred by a plaintiff in anticipation of a defendant’s performance, as well as additional losses that occur after a breach. A plaintiff can only recover special damages if they can establish that the defendant was aware of the special circumstances at the time that the contract was created.

Liquidated Damages

Some contracts include provisions for liquidated damages, a monetary amount that a party owes to the other in the event of a breach. As mentioned above, a lease agreement might provide for a penalty for a breach by a tenant. Courts will enforce liquidated damages clauses in contracts unless a party can show that they are somehow unconscionable.

Specific Performance

In situations in which monetary damages will not make a plaintiff whole, a court may order specific performance. This requires the defendant to perform their obligations under the contract. Specific performance is a common remedy in contracts for the sale of real estate, since each piece of real property is considered unique.

Punitive Damages

California courts do not recognize a right to punitive or exemplary damages for breach of contract, unless the breach occurs in connection with an intentional tort.

Treble Damages

Treble damages are available for federal antitrust violations, for example, but not breaches of contract.

Please contact Bona Law at 858-964-4589 or [email protected] if you need assistance with a contractual dispute. We represent both plaintiffs and defendants and are also available to negotiate before litigation.