In law, actual damages refers to money that is awarded to a plaintiff during a civil lawsuit. The damages are usually intended to serve as compensation for losses that the plaintiff has suffered as a result of a defendant’s actions or inaction. The amount of money given to the plaintiff usually correlates with the amount of harm, injury, or loss the plaintiff was able to prove he or she sustained. Actual damage awards are commonly referred to as compensatory damages.
As a general rule, actual damages are capable of being precisely measured, and are awarded in both tort and breach of contract cases. In a tort lawsuit, they may include the plaintiff’s expenses, such as medical bills, and loss of income due to an injury. They can also include expenses related to repairing or replacing property that was destroyed by a defendant. In a breach of contract claim, actual damages may be awarded for losses occurring as a result of a defendant failing to fulfill a contract. Actual damage awards are typically limited to the amount of money needed to make the injured party whole.
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In most jurisdictions, actual damages are viewed as income to the plaintiff for tax purposes. As a result, they are normally taxable and must be reported as income. Some jurisdictions do not tax certain types of actual damages, such as a personal injury award.
In order to receive an actual damage award, a plaintiff generally needs to prove that he or she suffered a legally valid harm, such as a broken leg, as a result of a defendant's negligent driving. In addition, the plaintiff must prove that a particular amount of money will be adequate compensation for the injury. A judge or jury usually determines the amount of money awarded to the plaintiff.
Actual damages are distinct from nominal damages and punitive damages. Nominal damages are a trivial sum of money that is usually granted in circumstances where the plaintiff suffered no real loss. Despite this, a defendant may be required to pay the plaintiff a small amount of money for the purpose of recognizing that a legal injury was in fact sustained by the plaintiff.
Rather than compensating a plaintiff, punitive damages are intended to punish a wrongdoer and deter others from engaging in similar wrongful behavior. They are commonly awarded in tort cases, as opposed to contract cases, where a defendant has acted recklessly or with malice. Courts may award punitive damages in addition to actual damages.