Breach of Contract and Punitive Damages

AdobeStock_69411638-300x200A breached contract can result in significant business losses. The amount of the contract may not reflect lost business, missed opportunities, and other financial losses that can seriously hurt your bottom line. Unfortunately, these losses are not adequately reflected by the value of the breached contract. In some cases, the contract actually specifies a value for breach – an estimate known as “liquidated damages.” This pre-breach estimate rarely reflects the full value of your company’s financial losses. This is why many companies seek punitive damages in addition to their specific losses under the contract. Punitive damages are designed to punish the defendant for misconduct in order to deter such conduct in the future. They are not, however, available in most breach of contract cases. Learn more about punitive damages – and when they might be available to help mitigate your losses under a breached contract.

Can You Get Punitive Damages for Intentional or Malicious Breach?

In California, punitive damages are only available in a breach of contract case if the defendant has also committed an intentional tort. This means that mere negligence, or a poor choice to breach the contract, will not justify punitive damages on its own.

Intentional torts are civil offenses. Some of them are not likely to occur in a business scenario: assault, battery, and false imprisonment are intentional torts and could support a finding of punitive damage in theory. But these do not often occur in a breach of contract case. What is more common is torts such as fraud, conversion, and intentional interference with a contractual relationship. For example: imagine that your company entered into a contract to supply your customer with bottled water. In order to get out of the contract, the customer goes to the supplier and convinces it to stop selling you the plastic needed for your water bottle lids. This is intentional interference with a contractual relationship. In your breach of contract claim against your customer, you could prove the tort and make your case eligible for punitive damages (in addition to your specific losses under the contract).

Experienced California Business Lawyers For All Breach of Contract Cases

Breach of contract can be costly for both parties. If your business is the victim of breach, you need an attorney to help enforce your contractual rights and protect your financial interests (including punitive damages wherever possible). If your business intends to breach a contract, you need an attorney to advise you on the best way to mitigate your losses and minimize your liability for a breach. Your business might even have grounds to excuse the breach if it is due to circumstances beyond your control. The coronavirus pandemic has created many unique situations – some of which are likely to justify a breach of contract due to circumstances beyond the parties’ control. Our experienced attorneys can help all business owners understand and enforce their contractual rights.  Contact Structure Law Group at (408) 441-7500 or contact us online.