Also known as: substitutionary damage · compensatory damages
Written by attorneys · grounded in primary & secondary sources — see below
An award of expectation damages measured by the difference between the cost of obtaining a reasonable substitute performance and the price the non-breaching party would have paid under the original contract. The measure places the injured party in the position it would have occupied had the contract been performed. Additional expenses incurred to secure the substitute, such as travel costs, are included when they are reasonable and necessary.
A law school contracted with Bill to teach for $10,000 but Bill breached before the semester began. The school hired Professor Wise for $19,000 plus $2,000 in travel expenses. The court awards the school $11,000 in substitutionary damages to cover the extra cost of the substitute and the added travel outlay.
A restaurant contracted with a local farm for weekly produce deliveries at a fixed price. After the farm breached, the restaurant paid a distant supplier a higher price plus shipping. The court awards substitutionary damages equal to the price difference and the shipping costs as the anticipated harm from the breach.
A homeowner contracted with a roofer for $8,000. The roofer breached after partial work. The homeowner paid a second roofer $14,000 to finish and correct defects. The court awards $6,000 in substitutionary damages reflecting the extra amount paid for the substitute performance.
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A publisher contracted with an author for a manuscript at a set fee. After breach the publisher paid a replacement author a higher fee plus editorial assistance costs. The court awards substitutionary damages covering the increased fee and assistance expenses as pecuniary losses from the breach.
A band contracted for a performance at a club for a fixed payment. After the club breached the band booked a smaller venue at lower pay and incurred extra promotion costs. The court awards substitutionary damages for the lost net revenue and the added promotion expenses as harm from the breach.
A buyer contracted to purchase equipment for $25,000. The seller breached and the buyer paid $32,000 to another seller for identical equipment. The court awards $7,000 in substitutionary damages to compensate for the higher price paid for the substitute performance.
The measure equals the difference between the cost of the reasonable substitute and the original contract price, plus any extra reasonable expenses such as travel or shipping. This calculation restores the non-breaching party to the position it would have occupied had the contract been performed.
Supporting sources
Yes. Substitutionary damages require proof of the actual extra cost incurred to obtain the substitute. Without evidence of that pecuniary outlay, recovery is unavailable even if a breach occurred.
Substitutionary damages themselves constitute the compensatory award for the breach. Additional general damages may be recovered only if they represent harm distinct from the cost of the substitute and are normally anticipated from the type of breach.
No. Substitutionary damages compensate only for the economic difference between the original contract and the substitute. Emotional distress is not part of this calculation and requires separate proof under rules governing non-pecuniary harm.
…Kennedy We address once again the due process question of whether an award of $145 million in punitive damages, where full compensatory damages are $1 million, is constitutionally excessive. We conclude that it is. I In 1981, Curtis Campbell was driving with his wife, Inez, in Cache County, Utah. He decided to pass a car…