Template:Loss v damages
Quick reminder: in the law of contract “losses” and “damages are” different, though related things.
Losses are pecuniary misfortunes that you might suffer as a result of a breach of contract. They can be divided into:
- “Direct” losses, that are the natural and foreseeable consequence of breach of contract.
- “Indirect” or “consequential” losses, which are a more speculative nature.
- “Account for profit”, which is an order than a wrongdoer hands over actual profits from a breach of duty to a property owner. These are available in trust and agency scenarios, and for misuse of physical or intellectual property, but are not a remedy for breach of contract.
Note that “loss of profit” and “loss of opportunity” are not judicially recognised categories of loss: they can be either direct — for example, foregone interest on a defaulted payment — or indirect — the winnings you would have got from putting that defaulted payment on a rank outsider who came good in the 2:35 at Kempton — but if in doubt (i.e., not a natural consequence of the breach) assume they will be indirect
Damages are the amounts a court orders a naughty counterparty to pay to an innocent one as compensation for its loss. They may, or may not, be the same amount as the actual losses suffered. Damages may be:
- “General” damages, if they compensate for direct losses.
- “Special” damages, if they relate to indirect losses. Awards of special damages are rare in contract cases, even when they are not specifically excluded by contract which, in the world of finance, they usually are.
- “Punitive” or “exemplary” damages, that do not compenstate for loss at all, but rather punish a wrongdoer for outrageous behaviour. These are not available under English law for breach of contract, but may be awarded — extremely rarely — in cases of tort, or breach of trust.
| Loss | Remedy |
|---|---|
| Direct loss | General damages |
| Indirect/consequential loss | Special damages |
| No actual loss, but egregious wrongdoing all the same | Exemplary/punitive damages (potentially available in tort and breach of fiduciary duty; not in contract) |
| Breach of trust or misuse of property | General damages and account for profit |