Free tool · Contract Law

How Much Are Contract Damages?

Contract damages usually aim to put the injured party where performance would have put them: the expectation measure. For a buyer of goods that is typically the extra cost of replacement goods, plus incidental and any foreseeable consequential loss, less the expenses saved. The law limits the award: consequential loss must have been foreseeable when the contract was made and be proved with reasonable certainty, and the injured party must take reasonable steps to reduce the loss. Where expectation is unavailable, the law may award reliance (money spent) or restitution (benefit given). Enter your own figures below to see the three measures side by side.

Tool · Contract Remedies Calculator

Who is claiming?Contract priceCost of cover (price of substitute goods) or market priceIncidental losses (storage, transport, search costs)Consequential losses (such as lost resale profit)Expenses saved by not having to performLoss that could reasonably have been avoidedMoney spent in reliance on the contractValue salvaged from that spendingValue of benefit given to the other sideLiquidated damages clause amount (0 if none)

The consequential loss was foreseeable when the contract was madeThe consequential loss can be proved with reasonable certainty

Expectation

$8,400

Reliance

$4,500

Restitution

How the expectation figure is built

Cost of cover (or market price) less the contract price (58,000 − 50,000)$8,000
Incidental losses$1,200
Less: expenses saved by not having to perform−$800
Expectation damages$8,400

Left out: Consequential losses ($9,000). Not recoverable unless proved with reasonable certainty: speculative profits are refused.

A buyer whose seller fails to deliver may cover (buy substitute goods in good faith and without unreasonable delay) and recover the extra cost (UCC 2-712), or recover the market-price difference (UCC 2-713).
Reliance: the injured party may instead recover what they spent in preparing to perform or performing, less what was salvaged, and the other side may show that the contract would have lost money anyway. Restitution: they may recover the value of a benefit they conferred, whether or not the contract was enforceable.
Under the UCC, a seller of goods or a buyer need not elect between remedies in the way that the common law once required, but the total cannot put them in a better position than performance would have.

Contract damages aim to put the injured party where performance would have put them (expectation). The calculator shows that figure, with the limits the law puts on it (foreseeability, certainty, mitigation and expenses saved), next to the two other measures: reliance and restitution. It also tests a liquidated damages clause against the penalty rule. The amounts are your own, invented figures and the rules are simplified general American rules. It illustrates the method; it does not assess a real claim and is not legal advice. Runs in your browser; nothing is stored or sent.

How to use it

Choose the kind of claim: a buyer, a seller, an owner with defective building work, or a dismissed employee.
Enter the contract price, the substitute or resale price, and any incidental and consequential losses.
Say whether the consequential loss was foreseeable and certain, and enter expenses saved and any loss that could have been avoided.
Read the expectation figure line by line, with reliance and restitution beside it, and test any liquidated damages clause.

Common questions

What are expectation, reliance and restitution damages?

Expectation gives the value of the performance that was promised. Reliance reimburses what the injured party spent in reliance on the contract. Restitution returns the value of a benefit that they conferred on the other side.

Can you recover lost profits for breach of contract?

Yes, if the loss was foreseeable when the contract was made (the rule in Hadley v Baxendale) and can be proved with reasonable certainty. Speculative profits are refused.

What is a penalty clause?

A pre-agreed sum for breach is enforceable as liquidated damages if it is a reasonable forecast of loss that is hard to estimate. If it is out of proportion to the harm, it is a penalty and is not enforced.

Learn the law behind the tool

This tool is part of our Contract Law course, with lectures, concept maps, flashcards, interactive exercises and a capstone case. Contract Law, Module 4: Remedies.

More free law tools

General information, simplified, mainly on American law, not legal advice. States and countries differ, and real cases turn on facts that a tool cannot capture.