A breach of contract can occur when a party to a valid contract fails to fulfill their side of the agreement. The terms that are included in a contract are what instruct the parties in what they must do, as well as how they should do it, in order to maintain their promise. If one party does not do what the contract instructs them to do, the non-breaching party will be allowed to take legal action such as by filing a lawsuit against them in court.
A breach of contract can occur as either a partial breach, or a complete breach. A court will also assess whether the breach was substantial or minor, which will help the court determine what type of damages the breaching party should be required to pay.
There are three overall ways in which a party can be held liable for breach of contract:
- There Is An Anticipatory Breach: Often referred to as anticipatory repudiation, this type of breach occurs when the breaching party informs the non-breaching party that they will not be able to fulfill the terms of their contract. Once the other party has been notified, they can sue for breach of contract;
- A Party Has Committed a Minor Breach: A minor breach of contract is what happens when one party fails to perform a small detail of the contract. Under such circumstances the contract has not been violated, and as such it can still be substantially performed. This also occurs when there is a technical error with the contract, such as a wrong date, price, or typo within the terms of the contract; and/or
- When There Is a Material or Fundamental Breach: These are the most common types of breaches that are cited as the basis of a breach of contract action. Material or fundamental breaches occur when the breach is so substantial that it essentially cancels the contract, because it renders performance by either party largely impossible.
Some other ways in which a contract can be breached include:
- When the contract is fraudulent;
- If the contract was formed illegally, or it is unconscionable; and
- When there is a mistake of fact contained within the contract terms.
The parties may also include conditions that are unique to their specific contract, which will specify when a party’s actions could be considered a breach. State laws and the type of contract that it is (such as a lease agreement, sales contract, government contract, etc.) may indicate other ways in which a contract can be breached.
What Are Nominal Damages In A Contracts Claim?
If a plaintiff wins at trial for a breach of contract, they will generally be awarded damages in order to compensate their losses. In a contract dispute specifically, damages are generally money awards which include the following:
- Compensatory Damages: Damages that cover a person’s monetary and non-monetary losses;
- Liquidated Damages: A set amount of damages that are agreed to in a contract in the event of a breach;
- Restitution: Damages that reimburse a party for out-of-pocket expenditures associated with the other party breaching the contract; and/or
- Punitive Damages: Damages that are intended to punish an individual for extreme and/or intentional wrongdoing.
A less common type of damages that can potentially be awarded would be referred to as nominal damages. These are awarded when wrongdoing is clearly present, but no real financial harm has occurred. Nominal damages generally only amount to $1 or $2 dollars.
It may seem unnecessary to award nominal damages because the amount of money is considerably insignificant. However, nominal damages are still important because they prove that the plaintiff had a legal right to file the lawsuit. They also prove that the defendant’s behavior was wrong. Nominal damages are frequently paired with the fact that there is no financial loss, or at least no financial loss that can amount to more than the nominal damages.
An example of this would be if company A entered into a contract with company B to manufacture 1,000 dolls. However, company A does not have the ability to manufacture dolls, but has told company B that they are able to do so. Rather, company A is hiring company C to manufacture the dolls at 1/3 of the typical cost, and will gain a large profit.
Company B discovers that they had 1,000 dolls on hand, and when they contacted company A they discovered that Company A is not the party who is actually making the dolls. While company B might not have suffered a financial loss of any kind, company A clearly deceived them.
Company B would likely avoid making a second contract with company A, and could have intended to break the contract. However, that does not change the fact that company A formed the contract based on fraud and/or deception. As such, company B would likely be awarded nominal damages for this deception.
Additionally, nominal damages may allow for punitive damages to be awarded. Punitive damages are generally only awarded in a small number of cases which are considered to be especially egregious, and cannot be considered unless the plaintiff is first awarded compensatory, nominal, or restitution damages.
Punitive damages are not generally awarded in contracts cases. The exception to this would be when bad faith is involved, or when the contract claim is combined with some type of tort claim. Under such circumstances, nominal damages become an important consideration when courts are calculating monetary awards in order to determine whether punitive damages are an appropriate award.
When Might Nominal Damages Be Awarded?
In general, plaintiffs do not request nominal damages; rather, the judge or jury will award nominal damages based on the facts at hand. Contracts commonly include a clause that claims whoever loses the lawsuit will need to pay the legal fees for the other party. What this means is that even though the winning party is only awarded $1.00, the cost of their attorney will be completely covered in the decision. As such, it may be worth it to still pursue legal action against the breaching party.
Uncommon in contracts cases, plaintiffs may request nominal damages on their own volition. This may be done when the plaintiff knows that they will win the case, and simply wants the legal system to acknowledge the wrongdoing. An example of this would be when they do not need the money, and believe that their case would be hampered if they requested anything more than nominal damages.
Nominal damages are especially rare in contracts cases because the majority of breach of contract claims generally involve some economic monetary loss to the plaintiff. However, the plaintiff will still need to prove all of the essential elements of a breach of contract claim in order to receive nominal damages.
Some contract situations in which nominal damages may be awarded include:
- The value of the loss cannot be determined;
- The contract case is also combined with a tort claim, such as fraud or coercion; and
- The defendant acted in bad faith during contract negotiations, or when executing their obligations under the contract.
In short, nominal damages are most appropriate in situations in which there might not be a calculable harm; however, there is without a doubt, a harm that deserves to be recognized formally by a court of law.
Do I Need A Lawyer For Help Obtaining Nominal Damages In A Contracts Claim?
If you are filing an action for breach of contract, you should contact a local contracts attorney. An experienced attorney can help you understand all of your legal rights and options according to your state’s specific laws, and can assist you with your case in order to determine whether nominal damages would be appropriate to pursue.
