damages
Definition
Damages is the money a court orders one party to pay another party to compensate for a loss or injury caused by wrongdoing or a broken contract. Think of it as the dollar amount that a judge or jury decides will make the injured person financially whole again. Courts calculate this amount based on the actual harm suffered, though in some cases they can award extra money to punish particularly bad behavior.
Example
If a supplier breaks a contract with your bakery and you lose $5,000 in sales because you had no ingredients, a court might award you $5,000 in damages to cover that lost revenue. You might also recover any extra costs you paid to find a last-minute replacement supplier.
Watch Out
Many contracts include a clause that limits how much money either side can claim in damages, so read those sections carefully before you sign anything.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.