When two parties make a legal contract, they are both under obligation to fulfill what they have agreed to do and they both have the right to expect that the other will uphold their end of the deal. When one of the parties chooses not to fulfill their obligation, a breach of contract occurs.
In California, the damages from a breach of contract are one of two types: general or special. Determining the appropriate damage type depends on the contract type.
General damages
Also called consequential damages, general damages consist of the foreseeable or natural consequences of a breach of contract. For example, a broken lease agreement would result in lost rental income for a landlord. In such a case, the court may require the party who broke the contract to repay that lost income.
Special damages
Special damages differ from general damages due to their specificity. Someone suing over a breach of contract may receive special damages for any expenses that were explicitly tied to the contract itself. This often requires a plaintiff to prove that the other party was aware of unique circumstances prior to signing the contract.
It is important for business owners to understand which type of damages they should seek if they experience a breach of contract. Not only can it make a difference in the amount of damages received, but it can help ensure that they have the correct documentation in hand to prove what obligations both parties agreed to in the specific contract.