Question

Think of a contract as a private set of laws that only apply to the two parties who signed it. Those two parties have determined and agreed to the subject, consideration, timing, duration, etc. for the contract. Generally, the court does not interfere with the parties’ agreement, except in certain circumstances (e.g. if the subject of the contract violates public policy). When a contract is breached and a lawsuit is filed, the court will generally award compensatory damages that make the non-breaching party “whole” again, as if the breach didn’t happen. The court rarely awards punitive damages that are designed to punish the breaching party.

Do you think punitive damages should be awarded in breach of contract cases? If so, discuss why and under what circumstances. If not, discuss why not, even under circumstances including fraud or malice.

Answer 1

Ans - Punitive damages are the monetary amount which is paid by the defendant to the plaintiff ( a person who brings the matter in the court) which is ordered by the court. It is done to punish for the malicious or fraudulent act. compensatory damages are given to the plaintiff by the defendant for damages, injury, loss, etc. Punitive damages are awarded when the act is intended to harm the other party. Punitive damages are given in addition to the compensatory damages to make an example or when the loss is not enough to recover from compensatory damages.

Yes, Punitive damages should be awarded in breach of contract in certain circumstances like -

1 Breach in an insurance policy: If there is a breach in contract in an insurance policy done by the insurer and if he made a false claim by lying then punitive damages should be applied by the court, because the insurance policy is based on an understanding of good faith between insurer and insurance company. It should not be violated.

2 Intentional selling of wrong products - If any company is intentionally selling certain products which is harmful to the consumers like processed food manufacturing company is selling certain food which is harmful or not showing ingredients properly then punitive damages should be awarded.

3 Fraud cases: If Fraud is done by one party in an agreement then Punitive damages should be given by the court.E.g in the real estate business, Bank loans. In these types of an agreement if one party is not paying the agreed amount intentionally then the court should take punitive action.

4 If the damage is reckless and intentional not enough to recover from compensation. For example, in drinking drive cases the loss is heavy like a major injury, death, etc. In such cases, the punitive damages should be awarded by the court to set an example for others.

5 Cases relating to tort ( an action that is wrong but not criminal): If in an agreement an independent tort is committed intentionally or due to recklessness which results in loss or harm then punitive damages should be awarded.