What is contractual damages?

By BGD Attorneys

Contractual damages are the compensation that is given by a court to someone who has suffered a loss due to a breach of contract or breach of fiduciary duty. In general, if one party fails to live up to their end of the bargain, it gives rise to a right by the other party for compensatory damages. The amount of these can either be stipulated in the contract or be determined on a case-by-case basis. Punitive Damages Reasons and Laws Punitive damages are awarded in addition to compensatory damages as punishment for wrongdoing, malice and oppression. They usually accompany compensatory damages instead of replacing them because they are not intended to compensate but rather punish. Making an example such as having reparations for unlawful behavior may be more successful than simply paying money for it prevents similar actions in the future.

Nature of Contractual Damages

You must prove the following in order to win a contractual damages claim: The contract existed, and both parties agreed to its terms. The defendant didn’t live up to this agreement — for example, he kept your money but failed to deliver the product you ordered. You suffered actual damage when the defendant breached his contract with you — for example, you had to cover $200 of your own expenses because of his lack of professionalism. There was a direct causal link between the breach and the harm you suffered. For example, if only one person can fix a problem and that person is at fault, or if the delay caused by the breach makes other contractors leave or raises prices. You shouldn’t recover any loss that doesn’t directly result from your opponent’s actions (called “collateral” loss). As an example, let’s say that you ran out of motivation during college due to poor grades due to mistakes made by your tutor.

General and Special Damages

Economic damages If a contract is breached, a party may recover damages for any loss caused by the breach. The type and severity of those economic damages will depend on the facts surrounding each case, but generally they include lost profits and revenue. Economic damages can be either direct or indirect: direct economic damages are the actual money lost (or foregone), whereas indirect economic damages are the additional expenses incurred as a result of the breach (e.g. additional costs to obtain replacement goods or services). General and special damages Your damages claim may include both general and special damages — which often overlap, especially if you’re claiming losses related to non-monetary items like reputation.

Date when damages are ascertained from

Date when damages are ascertained from As soon as a party is aware of an injury or loss and its cause, that party must in good faith record their claim.

Limitation on rights to recover contractual damages

This does not apply if the injury arose from the wilful misconduct or gross negligence of the injured party. An instance may arise where an action was not taken, or a contract was not performed on time, because the innocent party had reasonable grounds to believe that such action would cause loss to another innocent person in consequence to which they would be liable under the law. In this case, the innocent party can still recover damages, even though they were exempted by operation of law from liability otherwise imposed upon them according to law.

However, in certain respects, these exemption clauses may be tested against legislation such as certain provisions of the Consumer Protection Act 68 of 2008 which seek to enforce rights to fair, just, and reasonable contract terms for consumers protected by that Act.

According to South African court cases, if an exemption clause is unclear or not properly drafted: it will be interpreted against the party that drafted it; a party may have nothing to protect them from damages for intentional non-performance of a contract; a party cannot rely on a failure to deliver goods of the correct description as being exempt from liability for damages; and if you need protection from liability for a fundamental breach in your contract, your exemption clause should clearly state what is and isn’t allowed.

South African courts over time has held that exemption clauses :

• cannot exempt a party from damages for intentional non-performance of its duties in terms of a contract;
• can exempt a party for damages by unintentionally delivering goods of an incorrect description;
• may if sufficiently clear exempt a party from liability in respect of a fundamental breach of a contract;
• exempt a party from liability of his or her negligence conduct;
• may not exempt a party’s liability from his or her fraudulent conduct
• seeking to enforce conduct that is against public policy will not be upheld.

Plaintiff’s Duty to Mitigate Damages

The plaintiff must mitigate its damages however the plaintiff need not allege that it has taken steps to limit its damages. It is for the defendant to allege that the plaintiff has failed to mitigate its damages to the extent that the plaintiff has failed to do what a reasonable man would have done in the circumstances.

Conclusion

It’s important to remember to read the fine print and make sure you’re aware of all that could happen if there is a breach. From return policies to warranties — it’s all important in protecting the business against risk. It’s vital to be aware of what changes are acceptable and what isn’t — you don’t want an unhappy customer on your hands, but neither do you want a demanding one. It’s also key to know which actions customers can take in either case, as well as whether any sort of recourse is available, or if they’d even deem it worth the trouble.

Should you require assistance in these and other matters in the field of Contract Law Boogaard Attorneys can service Clients throughout South Africa remotely and can accommodate on-site visits at our practice in Fourways or attend to clients in various areas in Johannesburg North including Bryanston, Dainfern, Morningside, Midrand, Rivonia and Sandton to name a few.