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Avoiding Losses

| Apr 30, 2021 | Firm News |

The purpose of damages in breach of contract disputes is to put the non-breaching party in the same place it would have occupied if the contract had not been breached. This can be accomplished in several ways, depending upon the specifics of the transaction. At times, the non-breaching party will be awarded “benefit of the bargain” damages. Under this approach, the non-breaching party is awarded an amount equal to what it would have been expected to receive if the contract had been fully performed. The most common alternative method of damages, is the “out of pocket” approach. This method permits the non-breaching party to recoup the monies it expended in reliance upon the breaching party’s promise to perform.

Regardless of the theory of damages, contract law does not permit a non-breaching party to obtain a windfall – a position better than that which it would have occupied had the contract been performed. This means that, at least in theory, the best a breach of contract litigant can ever do is simply to recover that which has been lost.

All of this leads me to an inescapable conclusion – and advice I frequently give to clients. You are better off avoiding losses in the first place than you would be as a breach of contract plaintiff spending time and money trying to get back what you have lost. It is not always possible to avoid losses. But where losses can be avoided or mitigated, it is good idea to seriously consider pursuing this path first and then determining whether litigation would be beneficial.