What Are Breach of Contract Damages in California?
Breach of Contract damages in California are primarily either General Damages (sometimes called Direct Damages) or Special Damages (sometimes called Consequential Damages). General Damages are direct result of the breach i.e. general damages flow directly and necessarily from the breach of contract. On the other hand, Special Damages are damages that are not directly and necessarily result from the breach. In this article, we explore general principles of breach of contract damages in California and further expound upon General Damages and Special Damages. Read on to find out more about Breach of Contract Damages and Laws Regarding Breach of Contract in Los Angeles, CA.
With 80 years in combined business law experience, Law Advocate Group, LLP has a solid stable of talented and knowledgeable Los Angeles Breach of Contract Attorneys on hand and ready to assist you immediately. With any form of business comes the introduction of some type of formal agreement on paper. Formal Agreements are written up to protect all parties involved and is a binding contract defining the exact responsibilities and duties of all involved. When one person or persons fails to comply with the decided upon agreement or reveals that they have no intention or means to withhold their part of the agreement, then that becomes a Breach of Contract.
Los Angeles Breach of Contract Damages | Law Advocate Group, LLP
There are few things more devastating or disheartening in a business deal than a breach of contract. Throughout the years the subject of business contracts has become much more complicated. Which if you’re reading this, you may already be aware of that. It is essential that you have sound legal representation if you feel like you’ve fallen victim to an unlawful breach of contract and need to take further action. Law Advocate Group, LLP based in Beverly Hills California has a talented staff of Los Angeles Breach of Contract Attorneys on hand and ready to hear your claim. We are a simple phone call away. In situations like these, time is a huge factor. You should act immediately to secure professional and sound Breach of Contract legal representation. The faster you act, the closer you are to a resolution before time complicates matters worse.
If you feel that you were unfairly treated, or if you think your person or business is facing legal trouble due to Breach of Contract issues, please contact one of Law Advocate Group’s highly skilled Los Angeles Breach of Contract Attorneys today for further assistance.
INTRODUCTION
Breach of Contract in Los Angeles is generally governed by Civil Code Sections 3300-3302 and 3353-3360. The objective of the law of damages for breach of contract is to put the aggrieved party in the same position had the contract not been breached. The general measure of damages for breach of contract in California is enunciated in CA Civil Code Section 3300:
“For breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result from.”
In fact, the general principle governing measure of damages for a breach of contract in CA was recently enunciated in a Supreme Court case, Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 C4th 960:
“Damages awarded to an injured party for breach of contract “seek to approximate the agreed-upon performance.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 515 [28 Cal. Rptr. 2d 475, 869 P.2d 454] (Applied).) The goal is to put the plaintiff “in as good a position as he or she would have occupied” if the defendant had not breached the contract. (24 Williston on Contracts (4th ed. 2002) § 64:1, p. 7.) In other {Page 34 Cal.4th 968} words, the plaintiff is entitled to damages that are equivalent to the benefit of the plaintiff’s contractual bargain. (Id. at pp. 9-10; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 813, pp. 732-733; Peterson v. Larquier (1927) 84 Cal.App. 174, 179 [257 P. 873] [breach of lease permits injured party to recover difference between rental value at date of breach and rent specified in lease for its term].)
The injured party’s damages cannot, however, exceed what it would have received if the contract had been fully performed on both sides. (Civ. Code, § 3358.) This limitation of damages for breach of a contract “serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise.” (Applied, supra, 7 Cal.4th at p. 515.”
Exemplary or punitive damages are not recoverable in a breach of contract action, even if the defendant’s act was malicious, willful or fraudulent, unless a an independent tort is involved. (See, Cates Construction, Inc. v. Talbot Partners (1999) 21 C4th 28).
1. FORESEEABILITY OF DAMAGES
As the Civil Code Section 3300, states, “the measure of damages, …., is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby….”.
The case which enunciates and sheds light on determining reasonable foreseeability at the time of entering into a contract is Hadley v Baxendale (1854) 9 Ex 341, 156 Eng Rep 145:
“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated.”
2. REASONABLENESS OF DAMAGES
Civil Code Section 3359 provides: “Damages must, in all cases, be reasonable, and where an obligation of any kind appears to create a right to unconscionable and grossly oppressive damages, contrary to substantial justice, no more than reasonable damages can be recovered.”
3. REASONABLE CERTAINTY
Civil Code Section 3301 provides: “No damages could be recovered in a breach of contract which are not clearly ascertainable in both their nature and origin.” This means no speculative damages. In the case, Erlich v. Menezes (1999) 21 C4th 543, the Court held damages for emotional distress were speculative and non recoverable as special or consequential damages in a breach of contract action to build a house.
Albeit speculative damages are prohibited i.e. damages must be “clearly ascertainable”, the amount of damages need not be proven with absolute certitude, IF the damage is clear. In fact, the Court in Acree v. General Motors Acceptance Corp. (2001) 92 CA4th 385 stated that: “The law requires only that some reasonable basis of computation be used, and the result reached can be a reasonable approximation.”
GENERAL AND SPECIAL DAMAGES
1. GENERAL DAMAGES
General damages flow directly and necessarily from breach of contract. In other words, general damages are deemed to have been contemplated by the parties at the time of entering into the contract since their occurrence is deemed predicable if contract is breached.
2. SPECIAL DAMAGES
Special damages, on the other hand, do not necessarily flow from breach of contract. Special damages arise from particular circumstances of the parties or of the particular contract. To recover special damages, the special circumstances must have been communicated to or known by the defendant, or the defendant should have become aware of such special circumstances when the contract was entered into.
The premise of defaulting party’s knowledge of any special circumstances for plaintiff to be able to recover special damages is predicated upon the principle that the defaulting party should be able to evaluate the risks inherent in entering into the contract, if it breaches the contract.
LOST PROFITS RECOVERABLE IN BREACH OF CONTRACT
Lost profits are recoverable, IF lost profits’ extent and occurrence could be proven. Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 CA4th 435.
To prove this, plaintiff must prove such profits are the direct and natural consequence of a specific breach of contract. Postal Instant Press, Inc. v. Sealy (1996) 43 CA4th 1704.
If the fact of damages is certain, then the trial court has discretion to determine the measure of damages. Greenwhich S.F. v. Wong (2010) 190 CA4th 739. Lost profits could be measured by “the
past volume of business and other provable data relevant to the probable future sales.” Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 CA4th 847.
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