Contract Damages in Business Litigation in Texas

After businesses enter into a contract, those entities have certain responsibilities to one another until such a time that the contract has been completed. If one of the parties materially breaches the contract and the other party is harmed by that breach, then the other party is entitled to damages. But how do we measure those damages, i.e., how does the law provide an injured party damages in a contract case?

Plaintiffs in breach of contracts cases can seek several types of damages. These types of damages can be distinguished according to the function that each serves. In general, the types of available damages fall into three categories, known as “benefit of the bargain” (or “expectancy”), “reliance,” and “restitution” damages. It is sometimes said that expectancy damages are the “normal measure” of damages. What this means is that benefit-of-the-bargain damages is the most commonly sought measure or type of damages. It is does not imply that it is superior to the other measures of damages.

Benefit of the Bargain Damages: A party wishing to be placed in the same economic position that it would have occupied had the contract not been breached will seek expectancy damages as a result. Expectancy damages are tied to the expected benefit the non-breaching party was to receive had the breaching party not breached the contract.

Reliance Damages: If the injured party wishes to be placed in the same position that it would have occupied had the party not relied on the other party’s unperformed promise, reliance damages are proper.

Resitution Damages: Finally, an injured party may seek restitution if that party wishes to prevent the other nonperforming party from unjustly benefiting at its expense. This occurs when the other party has given money or assets to the other party and the other party has failed to perform on the contract. If the other party were able to keep the funds or assets that they received, they would be unjustly enriched as a result of that windfall.

Though these types of damages are the primary forms of damages, other forms are available. For instance, a plaintiff may seek nominal, punitive, or exemplary damages. Moreover, a plaintiff may seek damages as provided by statutes such as the Deceptive Trade Practices Act and the Texas Business and Commerce Code’s codification of the U.C.C. Regardless of what type of damages are appropriate, where the defendant is also owed some amount as a result of the same transaction that forms the basis of the plaintiff’s action, the defense of recoupment allows the defendant to decrease the plaintiff’s recovery by the amount due to them. In this regard, recoupment differs from set-off, in that amounts claimed under set-off arise from a transaction unrelated to the plaintiff’s claim.

Have Questions or Concerns about anything you’ve read? Need to speak to an attorney in the Forney, Rockwall, Dallas or Kaufman areas about a potential breach of contract case? Don’t Wait, call today at (972) 564-4644 or send us a message on our website or Facebook page.