In
law,
damages are money claimed by, or ordered to be paid to, a person as compensation for loss or injury
Black's Law Dictionary.
Compensatory damages
Compensatory damages, also called
actual damages, are paid to compensate the claimant for loss, injury, or harm suffered by (see requirement of
causation) another's breach of duty.
Quantum/measure of damages
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).
When it is either not possible or not desirable to award damages measured 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.
Damages in tort are generally awarded to place the claimant in the position he/she would have been 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 compensate the claimant for the non-monetary aspects of the specific harm suffered. This is usually 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, loss or impairment of mental or physical capacity, 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.
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.
Quantification of Personal Injury Claims
The quantification of personal injury is not an exact science. In English law solicitors like to call 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. The guidance solicitors will take into account to help quantify general damages are as hereunder:
1 The age of the clientThe age of the client is important especially when dealing with fatal accident claims or permanent injuries. The younger the injured victim with a permanent injury the longer that person has to live with the PSLA. As a consequence, the greater the compensation payment. In fatal accident claims, generally the younger deceased, the greater the dependency claim by the partner and children.
2 The nature and extent of the injuries sustained.Solicitors will consider “like for like” injuries with the case in hand and similar cases decided by the courts previously. This is known as precedents. Generally speaking decisions from the higher courts will bind the lower courts. Therefore, judgments from the House of Lords and the Court of Appeal have greater authority than the lower courts such as the High Court and the County Court. A compensation award can only be right or wrong with reference to previous judgments. Sometimes it is a matter of opinion of how much an injury claim is worth and the skill of the solicitor is persuading the opponent and ultimately the judge that their assessment is right. Solicitors must be careful when looking at older cases when quantifying a claim to ensure that the award is brought up to date and to take into account the court of appeal case in
Heil v Rankin Generally speaking the greater the injury the greater the damages awarded.
A quick guide to assess personal injury claims is by reference to the
Judicial Studies Board Guidelines for the Assessment of General Damages in Personal Injury Cases . Some case examples can also be considered
3 Sex of the clientGenerally speaking damages for personal injury for males and females are the same. However where there can be a difference weighted in favour of females is where the injury results in permanent scarring to the skin. Where the scarring is clearly visible such as the face, legs, and arms, females will usually obtain an greater amount of compensation than males. The compensation reflects the general assumption that females will be affected more than males by scarring and thus will be awarded more. However each case will be decided on its own particular facts. For instance a male model who sustains a scarring tissue to his face may obtain just as much as a female.
4 Personal attributes and fortitude of the clientThis heading is inextricably linked with the other points above. Where two clients are of the same age, experience and suffer the same injury, it does not necessarily mean that they will be affected the same. We are all different. Some people will recover more quickly than others. The courts will assess each claim on its own particular facts and therefore if one claimant recovers more quickly than another, the damages will be reflected accordingly. It is important to note here that “psychological injuries” may also follow from an accident which may increase the quantum of damages.
When a personal injury claim is settled either in court or out of court, the most common way the compensation payment is made is by a lump sum award in full and final settlement of the claim. Once accepted there can be no further award for compensation at a later time unless the claim is settled by provisional damages often found in industrial injury claims such as asbestos related injuries.
Special damages
Special damages compensate the claimant for the quantifiable monetary losses suffered by the plaintiff. 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, etc. 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 problems) and consequential or economic losses resulting from lost profits in a business. Special damages basically include the compensatory and punitive damages for the tort committed in lieu of the injury or harm to the plaintiff.
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, Fred sells Bob a watch for £100. Fred tells Bob it is an antique Rolex. In fact it is a fake one and worth £50. If it had been a genuine antique Rolex, it would be worth £500. Fred is in breach of contract and could be sued. In contract, Bob is entitled to an item worth £500, but he has only one worth £50. His damages are £450. Fred also induced Bob to enter into the contract through a misrepresentation (a tort). If Bob sues in tort, he is entitled to damages that put himself back to the same financial position place he would have been in had the misrepresentation not been made. He would clearly not have entered into the contract knowing the watch was fake, and is entitled to his £100 back. Thus his damages in tort are £100. (However, he would have to return the watch, or else his damages would be £50.)
If the transaction were a ‘bad bargain’, tort gives a better result for the claimant. If in the above example Bob had overpaid, paying £750 for the watch, his damages in contract would still be £450 (giving him the item he contracted to buy), however in tort damages are £700. This is because damages in tort put him in the position he would have been in had the tort not taken place, and are calculated as his money back (£750) less the value of what he actually got (£50).
Various matters
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 are the lost profits that the claimant could have been expected to make in the period whilst the factory was closed and rebuilt.
Foreseeability and remoteness
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 is known as
remoteness.
This rule does not usually apply to intentional torts (e.g.
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.
Quantifying losses in practice expert evidence
It may be useful for the lawyers for the plaintiff and/or the defendant to employ
forensic accountants or
forensic economists 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.
Statutory damages
Statutory damages are laid down in law. Mere violation of the law can entitle the victim to a statutory award.
For example, the possible remedies for
misrepresentation in the United Kingdom are codified in the
Misrepresentations Act.
Nominal damages
On the other hand, nominal damages are very small damages awarded to show that the loss or harm suffered was technical rather than actual. Perhaps the most famous nominal damages award in modern times has been the $1 verdict against the
National Football League (NFL) in the 1986 antitrust suit prosecuted by the
United States Football League. Although the verdict was automatically
trebled pursuant to
antitrust law in the United States, the resulting $3 judgment was regarded as a victory for the NFL. Historically, one of the best known nominal damage awards was the
farthing that the
jury awarded to
James Whistler in his libel suit against
John Ruskin. In the English jurisdiction, nominal damages are generally fixed at £2.
Many times a party that has been wronged but is not able to prove significant damages will sue for nominal damages. This is particularly common in cases involving alleged violations of constitutional rights, such as freedom of speech.
Punitive damages (non-compensatory)
Generally,
punitive damages, which are also termed
exemplary damages in the
United Kingdom, are not awarded in order to compensate the plaintiff, but in order to reform or deter the defendant and similar persons from pursuing a course of action such as that which damaged the plaintiff. Punitive damages are awarded only in special cases where conduct was egregiously invidious and are over and above the amount of compensatory damages. Great judicial restraint is expected to be exercised in their application. In the
United States punitive damages awards are subject to the limitations imposed by the
due process of law clauses of the
Fifth and
Fourteenth Amendments to the
United States Constitution.
In
England and
Wales, exemplary damages are limited to the circumstances set out by
Lord Patrick Devlin in the leading case of
Rookes v. Barnard. They are:
- Oppressive, arbitrary or unconstitutional actions by the servants of government.
- Where the defendant's conduct was 'calculated' to make a profit for himself.
- Where a statute expressly authorises the same.
Rookes v Barnard has been much criticised and has not been followed in
Canada or
Australia or by the
Privy Council.
Restitutionary or disgorgement damages
In certain areas of the law another head of damages has long been available, whereby the defendant is made to give up the profits made through the civil wrong in
restitution. The plaintiff thereby gains damages which are not measured by reference to any loss sustained. In some areas of the law this heading of damages is uncontroversial; most particularly
intellectual property rights and breach of fiduciary relationship.
In England and Wales the
House of Lords case of
Attorney-General v. Blake opened up the possibility of restitutionary damages for breach of contract. In this case the profits made by a defecting spy,
George Blake, for the publication of his book, were awarded to the British Government for breach of contract. The case has been followed in English courts, but the situations in which restitutionary damages will be available remain unclear.
The basis for restitutionary damages is much debated, but is usually seen as based on denying a wrongdoer any profit from his wrongdoing. The really difficult question, and one which is currently unanswered, relates to what wrongs should allow this remedy.
Legal costs
In addition to damages, the successful party is entitled to be awarded his reasonable legal costs that he spent during the case. This is the rule in most countries other than the United States. In the United States, a party generally is not entitled to its
attorneys' fees or for hardships undergone during trial.
See American rule.
History
Among the
Saxons, a price called
Weregeld was paid for
homicide by the killer, in part to the family of the victim, in part to the local king.
See also
