What type of damages are awarded to compensate an injured party for the exact amount of their loss in a contract?

Compensatory damages are designed specifically to make the injured party whole by providing a monetary award that reflects the actual losses suffered due to a breach of contract. These damages are calculated based on the precise value of the loss, ensuring that the party who suffered the breach is compensated for their direct financial injuries, such as lost profits, costs incurred, or other measurable detriments resulting from the breach.

Understanding the context of compensatory damages is crucial because they address the fundamental principle that individuals should not gain a windfall from a legal dispute, nor should they bear undue losses due to another's failure to fulfill contractual obligations. This emphasis on restoring the injured party to their pre-breach position aligns with the basic goals of contract law. Other types of damages, such as punitive damages, are intended to punish a party for wrongful conduct and deter future misconduct, rather than merely compensating for losses.