Pennsylvania common law recognizes that contracts form the basis of business. When one party does not honor its obligations under the contract, one or more of the other parties can sustain significant financial losses. Depending on the severity of the breach, a company’s ability to stay in business could be at stake.
This is why the law gives businesses the right to sue for breach of contract. Aggrieved companies can seek full compensation for any loss of revenue and other harms caused by the breach. Civil law recognizes three types of damages in breach of contract litigation:
- Compensatory damages: Compensation for actual harm suffered by the plaintiff, such as lost revenue. The purpose of compensatory damages is to put the plaintiff in the same or similar position they would have been had the defendant not breached the contract.
- Liquidated damages: Often, parties to a contract will agree to what damages they will pay if any of them breach. Liquidated damages will be accepted only if they are a reasonable estimate of the actual damages that the breach can cause.
- Punitive damages: In rare cases, a breach is so egregious that compensatory damages are insufficient to teach the defendant a lesson. Rather than making the plaintiff whole again, punitive damages exist to punish the defendant’s extreme misconduct.
- Specific performance: Sometimes, instead of financial compensation, the plaintiff would prefer the court force the defendant to perform its duty under the contract. This is known as “specific performance.”
In breach of contract litigation, your business must understand its rights and options. Knowing what damage your company suffered and how to pursue them can help you set things right.