What Is the Difference Between General and Special Damages in a Contract?

Damages is another word for compensation in a legal case. In some lawsuits for breach of contract, you can ask for both general and special damages. But what exactly does that mean in California?

When you sue somebody for failing to live up to the terms of a contract, it's called a breach of contract action. In a breach of contract case in California, you have to prove several elements: the existence of the contract, the fact that the person you are suing was a party to the contract, and the fact that they failed to fulfill their responsibilities under the contract.

In order to win damages, you must prove that you suffered harm from the other party's breach of the contract terms. That means you have to provide evidence of the harm you suffered and also how the damages were caused by the breach of contract.

Breach of contract damages in California are compensatory damages. That means they are intended to compensate the aggrieved party for losses suffered as result of the breach. The idea is to put that person in the same position they would have been in had the other party lived up to the contract terms.

California allows a party to recover both general and special damages for breach of contract. But it's important to understand the differences between general and special damages in contract cases if you are thinking of suing.

General damages are also called direct damages because they are losses that flow directly from the breach of a contract. Their relationship to the breach of contract is so clear that the law assumes that the parties should have known at the time they entered into the contract that these losses would result from a breach.

Special damages do not flow directly from the breach of contract. These types of injuries, although a consequence of the breach, result from the particular circumstances of the contract or the parties. In order for the aggrieved party to get special damages, the other party must have been aware of the special circumstances when the contract was made.

Special damages are also called consequential damages, and there is no difference between the terms. A typical example of special damages in contract cases is loss of profits.

Read More: What is Contract Law?

If you are familiar with personal injury law, you may have heard the same general damages and special damages terminology used in reference to tort, or personal injury, law. Despite the use of the same terminology, the meaning is not the same in contract law.

In a personal injury case, general damages are those items of compensation that reimburse the person for economic losses. Special damages are those that compensate for noneconomic losses like pain and suffering.

In order to obtain an award for special damages, several requirements must be fulfilled. The losses suffered must be:

• Foreseeable: The losses must be reasonably foreseeable or “within the contemplation of the parties” at the time the contract was formed.
• Flowing From the Breach: The losses don’t need to be a direct consequence of the breach, but there should be some causal connection between the losses and the breach. 
• Calculable: Since special damages cover losses not provided for in the contract terms, it can be difficult to calculate the amount. For example, it may be difficult to determine how much one has lost due to a damaged business reputation. Losses must be calculable at the time of contract formation.

These types of noneconomic losses are not recoverable at all in a claim for breach of contract. They are unique to personal injury law. The term "special damages" has an entirely different meaning in contract law.