Contracts are at the foundation of many commercial relationships. You have the fair and reasonable expectation that other parties will uphold their obligations under the contract they signed. If they fail to do so, it can cause significant financial damage to your company and result in a breach of contract claim.

This raises an important question: What types of compensation can be recovered in a breach of contract claim in California? Here, our Novato business litigation attorneys answer the questions by providing a comprehensive overview of breach of contract damages in California.

The Primary Types of Damages in a Commercial Breach of Contract Claim

When one party fails to fulfill their obligations under a valid business contract, the non-breaching party has the right to seek financial compensation for their damages. In California, breach of contract damages are generally to put the plaintiff in the same position that they would have been in had the breach never occurred. As described in the Judicial Council of California Civil Jury Instructions (CACI No. 350. Introduction to Contract Damages), courts accomplish this goal by awarding damages that are a natural and foreseeable consequence of the breach.

The damages fit into two broad categories. The first, general damages, covers the losses that arise directly out of the contract breach. The second category, special damages, covers incidental damages. In California, special damages are somewhat more difficult to recover. The general rule is that the closer you can tie a financial loss to the breach of contract, the easier it is to recover compensation.

Other Remedies May Be Available in California

As noted above, general damages and special damages will make up the basis of any breach of contract claim in California. Though, in certain circumstances, other breach of contract remedies may also be available. Specifically, you may be entitled to:

• Liquidated Damages: Some commercial agreements include provisions allowing for the recovery of liquidated damages. These damages are pre-determined when a contract is formed. In California, a liquidated damages clause is valid as long as the amount called for bears a reasonable relationship to the actual damages anticipated at the time of breach.
• Equitable Relief (Specific Performance): Though generally disfavored, California courts have the authority to award equitable relief (specific performance) as a breach of contract remedy when appropriate. As defined by the Cornell Legal Information Institute, equitable relief is a court order that instructs a party to take (or refrain from taking) a certain action as called for by the contract.
• Punitive Damages: In California, courts cannot award punitive damages for a breach of contract unless there was an intentional tort. Most often, a plaintiff must prove fraud or some other form of serious misconduct to make a claim for punitive damages.

Under California Code of Civil Procedure section 337(a), a breach of contract lawsuit for a written agreement is subject to a four-year statute of limitation. With oral contracts, the statute of limitations is only two years. Companies considering filing a breach of contract claim should be proactive. You are in a better position to prove liability and maximize your financial recovery if you act quickly.

Call Our California Business Lawyers for Immediate Help

At the Law Office of David C. Winton, our California business law attorneys have the skills and real world legal experience to protect the rights and interests of our company. If you have any questions about breach of contract damages, we are here to help. Contact us now for a strictly confidential business law consultation. With legal offices in Novato, Nevada City, and Auburn, our law firm serves communities throughout the entire region.