When a party to a contract fails to fulfill their obligations, it can be financially detrimental. You may consider filing a lawsuit and wonder, How much can you sue for breach of contract?
The law does not provide a formula for contract damages, but there are several important considerations that factor into calculating the appropriate amount of damages.
Can I Sue for Breach of Contract?
Before diving into how much you can sue for breach of contract, first determine if you have a viable claim. A valid breach of contract claim must include the following four elements:
- There is a legally binding contract between the parties;
- The plaintiff fulfilled their contractual obligations;
- The defendant breached their contractual obligations; and
- The plaintiff suffered losses as a result of the defendant’s breach.
As the plaintiff, you must be able to prove you suffered harm due to the breach. Our breach of contract attorneys at Hunnicutt Law Group will walk through each element to help you determine whether you have a strong case.
What Type of Damages May You Seek?
When suing for breach of contract, you may ask for compensatory, consequential, incidental, and liquidated damages. Punitive damages, which are meant to punish the breaching party for their behavior, are available only for breaches of contract that also involve a tort, such as embezzlement or fraud.
The purpose of compensatory damages (also known as “actual damages”) is to compensate the nonbreaching party. These damages cover the losses that directly stem from the breach and make the nonbreaching party whole again. Courts typically award compensatory damages in breach of contract claims.
Consequential damages (or “special damages”) are damages that occur as an indirect, but reasonably foreseeable, result of the breach. Loss of profits is an example of consequential damages.
Incidental damages are expenditures that the nonbreaching party incurs when trying to minimize the losses from the breach. For example, if the nonbreaching party needs to buy substitute goods or services and has to pay a premium for the last-minute purchase, those are incidental losses.
Some contracts include a liquidated damages provision, which specifies an agreed-upon amount in the event of a breach. This provision kicks in when the computation of damages is too difficult to calculate.
What Was the Extent of the Breach?
The extent of the breach factors into the amount you can sue for because it will impact how much you lost. Consider the following severity levels of breach:
- Minor or impartial breach: a portion of the contract was fulfilled, but not the entire contract.
- Material or total breach: either the entire contract is unfulfilled or the unfulfilled portion is substantial enough that it prohibits the parties from continuing to perform under the contract.
- Anticipatory breach: one party informs the other that they will not be able to perform.
Remember, the breach must have caused you losses for you to seek damages.
How to Calculate Damages
As the nonbreaching party to a contract, you have legal rights to damages for your losses. When calculating damages, the following considerations apply:
- Damages must compensate the nonbreaching party for the harm directly caused by the breach (i.e. compensatory damages);
- Damages must have been reasonably foreseeable or anticipated by the parties at the time of contract (i.e. consequential damages);
- Damages must be proven through ascertainable measures; and
- Plaintiffs cannot recover more than they lost, meaning the damages may only restore the plaintiff to the position they would have been in had the contract been fulfilled.
At The Hunnicutt Law Group, we can help you navigate these factors to determine an amount that will recoup your losses.
Limitations on Award of Damages
Most states, including Texas, do not have a general cap on compensatory damage awards. However, the nonbreaching party has a duty to mitigate damages, meaning they must minimize the amount of damages to the extent reasonable. The nonbreaching party will not be able to recover losses that they could have avoided.
Contact The Hunnicutt Law Group
At Hunnicutt Law Group, we represent clients in a wide variety of contract matters. Our founding attorney, Steve Hunnicutt, has 30 years of experience achieving success for his clients. He and his team focus their practice on litigation and disputes, and we have helped countless clients navigate their contract litigation disputes.
Call us at 214-361-6740 or fill out our online form to schedule an initial consultation either in our office or by remote video conferencing.