compensatory damages

At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at law, the loss must involve damage to property, or mental or physical injury; pure economic loss is rarely recognised for the award of damages.

Compensatory damages are further categorized into special damages, which are economic losses such as loss of earnings, property damage and medical expenses, and general damages, which are non-economic damages such as pain and suffering and emotional distress. Rather than being compensatory, at common law damages may instead be nominal, contemptuous or exemplary.

History

Among the Saxons, a monetary value called a ''weregild'' was assigned to every human being and every piece of property in the Salic Code. If property was stolen or someone was injured or killed, the guilty person had to pay the weregild as restitution to the victim's family or to the owner of the property.

Proof of damages

Proximate cause

Recovery of damages by a plaintiff in lawsuit is subject to the legal principle that damages must be proximately caused by the wrongful conduct of the defendant. This is known as the principle of proximate cause. This principle governs the recovery of all compensatory damages, whether the underlying claim is based on contract, tort, or both. Damages are likely to be limited to those reasonably foreseeable by the defendant. If a defendant could not reasonably have foreseen that someone might be hurt by their actions, there may be no liability.

This rule does not usually apply to intentional torts (for example, tort of deceit), and also has stunted applicability to the quantum in negligence where the maxim 'Intended consequences are never too remote' applies: 'never' is inaccurate here but resorts to unforeseeable direct and natural consequences of an act.

Expert testimony

It may be useful for the lawyers, the plaintiff and/or the defendant to employ forensic accountants or someone trained in the relevant field of economics to give evidence on the value of the loss. In this case, they may be called upon to give opinion evidence as an expert witness.

Compensatory damages

Compensatory damages are paid to compensate the claimant for loss, injury, or harm suffered by the claimant as a result of another's breach of duty that caused the loss. For example, compensatory damages may be awarded as the result of a negligence claim under tort law. Expectation damages are used in contract law to put an injured party in the position it would have occupied but for the breach. Compensatory damages can be classified as special damages and general damages.

Quantum (measure) of damages

Liability for payment of an award of damages is established when the claimant proves, on the balance of probabilities, that a defendant's wrongful act caused a tangible, harm, loss or injury to the plaintiff. Once that threshold is met, the plaintiff is entitled to some amount of recovery for that loss or injury. No recovery is not an option. The court must then assess the amount of compensation attributable to the harmful acts of the defendant. The amount of damages a plaintiff would recover is usually measured on a "loss of bargain" basis, also known as expectation loss, or "economic loss". This concept reflects the difference between "the value of what has been received and its value as represented".

Damages are usually assessed at the date of the wrongful act, but in England and Wales, Pelling J has observed that this is not the case if justice requires the assessment of damages to be calculated at some other date. In ''Murfin v Ford Campbell'', an agreement had been entered into whereby company shares were exchanged for loan notes, which could only be redeemed if certain profit thresholds had been achieved in the relevant accounting years. As the thresholds were not met, the loan notes were not redeemable, but at the date of the advisors' breach of contract this could not be known, only the loan notes' face value could be known. The conclusion was that in this case valuation could not be done until after the profit performance became known. In his judgement Pelling also referred to the case of '' Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd'', a case where continuing misrepresentation affected the appropriate date for damages to be assessed.

Special damages

''Special damages'' compensate the claimant for the quantifiable monetary losses he has suffered. For example, extra costs, repair or replacement of damaged property, lost earnings (both historically and in the future), loss of irreplaceable items, additional domestic costs, and so on. They are seen in both personal and commercial actions.

Special damages can include direct losses (such as amounts the claimant had to spend to try to mitigate damages) and consequential or economic losses resulting from lost profits in a business.

Damages in tort are awarded generally to place the claimant in the position in which he would have been had the tort not taken place. Damages for breach of contract are generally awarded to place the claimant in the position in which he would have been had the contract not been breached. This can often result in a different measure of damages. In cases where it is possible to frame a claim in either contract or tort, it is necessary to be aware of what gives the best outcome. If the transaction was a "good bargain", contract generally gives a better result for the claimant.

As an example, Neal agrees to sell Mary an antique Rolex watch for £100. In fact the watch is a fake and worth only £50. If it had been a genuine antique Rolex, it would have been worth £500. Neal is in breach of contract and could be sued. In contract, Mary is entitled to an item worth £500, but she has only one worth £50. Her damages are £450. Neal also induced Mary to enter into the contract through a misrepresentation (a tort). If Mary sues in tort, she is entitled to damages that put herself back to the same financial position place she would have been in had the misrepresentation not been made. She would clearly not have entered into the contract knowing the watch was fake, and is entitled to her £100 back. Thus her damages in tort are £100. (However, she would have to return the watch, or else her damages would be £50.)

If the transaction were a "bad bargain", tort gives a better result for the claimant. If in the above example Mary had overpaid, paying £750 for the watch, her damages in contract would still be £450 (giving her the item she contracted to buy), however in tort damages are £700. This is because damages in tort put her in the position she would have been in had the tort not taken place, and are calculated as her money back (£750) less the value of what she actually got (£50).

Incidental and consequential losses

Special damages are sometimes divided into incidental damages, and consequential damages.

Incidental losses include the costs needed to remedy problems and put things right. The largest element is likely to be the reinstatement of property damage. Take for example a factory which was burnt down by the negligence of a contractor. The claimant would be entitled to the direct costs required to rebuild the factory and replace the damaged machinery.

The claimant may also be entitled to any consequential losses. These may include the lost profits that the claimant could have been expected to make in the period whilst the factory was closed and rebuilt.

Breach of contract duty - (ex contract)

On a breach of contract by a defendant, a court generally awards the sum that would restore the injured party to the economic position they expected from performance of the promise or promises (known as an " expectation measure" or "benefit-of-the-bargain" measure of damages). This rule, however, has attracted increasing scrutiny from Australian courts and legal commentators... A judge arrives compensatory number by considering both the type of contract, and the loss incurred.

When it is either not possible or not desirable to award the victim in that way, a court may award money damages designed to restore the injured party to the economic position they occupied at the time the contract was entered (known as the " reliance measure").. or designed to prevent the breaching party from being unjustly enriched ("restitution") (see below).

Parties may contract for liquidated damages to be paid upon a breach of the contract by one of the parties. Under common law, a liquidated damages clause will not be enforced if the purpose of the term is solely to punish a breach (in this case it is termed penal damages).. The clause will be enforceable if it involves a genuine attempt to quantify a loss in advance and is a good faith estimate of economic loss. Courts have ruled as excessive and invalidated damages which the parties contracted as liquidated, but which the court nonetheless found to be penal. To determine whether a clause is a liquidated damages clause or a penalty clause, it is necessary to consider:

i) Whether the clause is 'extravagant, out of all proportion, exorbitant or unconscionable'.

ii) Whether there is a single sum stipulated for a number of different breaches, or individual sums for each breach.

iii) Whether a genuine pre-estimate of damage is ascertainable

Breach of tort duty - (ex delicto)

Damages in tort are generally awarded to place the claimant in the position that would have been taken had the tort not taken place. Damages in tort are quantified under two headings: general damages and special damages.

In personal injury claims, damages for compensation are quantified by reference to the severity of the injuries sustained (see below general damages for more details). In non-personal injury claims, for instance, a claim for professional negligence against solicitors, the measure of damages will be assessed by the loss suffered by the client due to the negligent act or omission by the solicitor giving rise to the loss. The loss must be reasonably foreseeable and not too remote. Financial losses are usually simple to quantify but in complex cases which involve loss of pension entitlements and future loss projections, the instructing solicitor will usually employ a specialist expert actuary or accountant to assist with the quantification of the loss.

General damages

''General damages'' are monetary compensation for the non-monetary aspects of the specific harm suffered. These damages are sometimes termed 'pain, suffering and loss of amenity'. Examples of this include physical or emotional pain and suffering, loss of companionship, loss of consortium, disfigurement, loss of reputation, impairment of mental or physical capacity, hedonic damages or loss of enjoyment of life, etc. This is not easily quantifiable, and depends on the individual circumstances of the claimant. Judges in the United Kingdom base the award on damages awarded in similar previous cases. In 2012 the Court of Appeal of England and Wales noted that General damages in England and Wales were increased by 10% for all cases where judgements were given after 1 April 2013, following changes to the options available to personal injury claimants wanting to cover the cost of their litigation.

General damages are generally awarded only in claims brought by individuals, when they have suffered personal harm. Examples would be personal injury (following the tort of negligence by the defendant), or the tort of defamation.

General damages in personal injury cases

The quantification of personal injury is not an exact science. In English law solicitors treat personal injury claims as "general damages" for pain and suffering and loss of amenity (PSLA). Solicitors quantify personal injury claims by reference to previous awards made by the courts which are "similar" to the case in hand. Judicial College "Guidelines for the Assessment of General Damages in Personal Injury Cases" are adjusted following peri