Describe the types of monetary damages one can recover in a breach of contract action

Question

What will be an ideal response?

Answer 1

Monetary damages are of three types: compensatory, consequential, and liquidated. Compensatory damages are intended to compensate a nonbreaching party for the loss of the bargain. They place the nonbreaching party in the same position as if the contract has been fully performed by restoring the "benefit of the bargain." Additionally, a nonbreaching party sometimes can recover consequential, or special, damages from the breaching party. Consequential damages are foreseeable damages that arise from circumstances outside the contract. To be liable for consequential damages, the breaching party must know or have reason to know that the breach will cause special damages to the other party. And, under certain circumstances, the parties to a contract may agree in advance to the amount of damages payable upon a breach of contract. These are called liquidated damages. To be lawful, the actual damages must be difficult or impracticable to determine, and the liquidated amount must be reasonable in the circumstances. An enforceable liquidated damage clause is an exclusive remedy even if actual damages are later determined to be different. A liquidated damages clause is considered a penalty if actual damages are clearly determinable in advance or the liquidated damages are excessive or unconscionable, in which case the liquidated damages clause is unenforceable and the nonbreaching party may then seek actual damages.