Compensatory Damages

Definition

Compensatory damages are an amount calculated to compensate a party for economic loss caused by the wrongful act of another.

Purpose

The purpose of compensatory damages is to restore the injured party to the financial position they were in before the wrongful act occurred. These damages cover actual losses, including medical expenses, lost wages, and property damage.

Examples of Use

• In personal injury cases, compensatory damages may cover medical bills and rehabilitation costs.
• In breach of contract cases, compensatory damages might include the loss of expected profits and costs incurred due to the breach.
• Property damage claims can include compensatory damages for repair or replacement costs.

Related Terms

• Punitive Damages: Damages awarded to punish the defendant for particularly egregious conduct.
• Nominal Damages: A small sum awarded when a legal wrong has occurred, but no substantial injury or loss resulted.
• Actual Damages: Another term for compensatory damages, emphasizing the direct and measurable loss.

Notes

Calculating compensatory damages requires detailed documentation of losses and often involves expert testimony to establish the extent and value of the economic impact.