Damages are not assessed in an arbitrary fashion but are subject to various judicial guidelines. The general principle is that the claimant is entitled to full compensation for his or her losses. The purpose of damages in tort is to put the claimant in the position that he or she would have been in had the tort not been committed. The purpose of damages in contract is to put the claimant in the position that he or she would have been in had the contract been performed. In either case the claimant must take all reasonable steps to mitigate his or her losses. Damages can be further classified as liquidated or unliquidated, general or specific, and substantial, nominal, or exemplary.
Liquidated and unliquidated damages
Damages capable of being quantified in monetary terms are known as liquidated damages. In particular, liquidated damages include instances in which a genuine pre-estimate can be given of the loss that will be caused to one party if a contract is broken by the other party. If the anticipated breach of contract occurs this will be the amount, no more and no less, that is recoverable for the breach. Liquidated damages must be distinguished from any penalties specified in a contract as payable on its breach (which do not usually constitute a genuine estimate of the likely loss). Another form of liquidated damages is that expressly made recoverable under a statute. These may also be known as statutory damages if they involve a breach of statutory duty or are regulated or limited by statute. Unliquidated damages are those fixed by a court rather than those that have been estimated in advance.
General and specific damages
General damages represent compensation for general damage, which is the kind of damage the law presumes to exist in any given situation. They are recoverable even without being specifically claimed and are awarded for the usual or probable consequences of the wrongful act complained of. For example, in an action for medical negligence, pain and suffering is presumed to exist, therefore if the action is successful, general damages would be awarded as compensation even though not specifically claimed or proved. Loss of earnings by the injured party, however, must be specifically claimed and proved, in which case they are known as specific damages.
Prospective damages are awarded to a plaintiff, not as compensation for any loss suffered at the time of a legal action but in respect of a loss it is reasonably anticipated will be suffered at some future time. Such an injury or loss may sometimes be considered to be too remote and therefore not recoverable.
Substantial, nominal, and exemplary damages
Substantial damages are awarded to provide compensation when actual damage has been caused. By contrast, nominal and contemptuous damages are awarded for trifling amounts – usually when the court is of the opinion that although the plaintiff's rights have been infringed no real loss has been suffered, or, that although actual loss has resulted, the loss has been caused in part by the conduct of the plaintiff. The prospect of receiving only nominal or contemptuous damages prevents frivolous actions being brought. The award is usually accompanied by an order that each party bears their own legal costs.
Subjects: Business and Management.