actual damages

Actual Damages

In a lawsuit, the damages the judge or jury orders one party to pay the other to compensate for real losses the second party suffered resulting from the action or negligence of the first party. For example, if Joe sues Bob because Bob caused $5,000 in damage to Joe's property, the actual damages the jury awards will equal $5,000. Actual damages differ from both nominal damages and punitive damages.

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actual damages

Losses or injuries for which the law allows compensation as a means of reimbursement;used also to refer to the money awarded by a court as that compensation.Contrast with nominal damages,which would award $1,but recognize that the plaintiff's rights have been violated even though no economic, physical, or emotional harm occurred. Contrast also with punitive damages,which are not intended to compensate the victim but to punish the aggressor.

Actual damages may be

• Direct damages—those that flow directly and naturally from the wrong

• Consequential damages—those that flow from some consequence of the wrong

Example: Able agrees to purchase Baker's house. As a result of that contract, Baker agrees to buy a new condo under construction and pays a nonrefundable $5,000 reservation fee. Able then defaults and refuses to purchase Baker's house, even though Able has no justifiable reason for doing so. Two weeks later the stock market crashes, and Baker counts himself lucky when he is able to sell his house for $40,000 less than the original contract price. But, Baker is now unable to purchase the condo and loses his $5,000. Under the right circumstances, Able could be liable to Baker for actual damages consisting of the $40,000 difference in the two sale prices (direct damages) and for the loss of the $5,000 earnest money (consequential damages—more indirect and less predictable) and for punitive damages.