5 Types of Damages That May Be Awarded for a Breach of Contract

Contracts are the foundation of nearly every business relationship. Whether between suppliers and vendors, employers and contractors, or partners and clients, each agreement sets out specific duties and expectations. When one party fails to meet those obligations, a breach of contract has occurred.

Breach of contract cases can range from relatively minor delays to serious violations that cause substantial financial losses. In Illinois, the party harmed by the breach has the right to pursue damages. “Damages” is simply the legal term for financial compensation intended to make an injured party “whole” again. The exact amount and type of damages depend on the terms of the contract, the nature of the breach, and the losses involved.

Below are five major types of damages that courts may award in a breach of contract case, along with examples of when they apply. If you believe your business is suffering from a breach of contract in 2025, contact our Naperville, IL business law attorney right away. 

What Happens When a Contract Is Breached?

Contracts are the backbone of successful business operations. They define the responsibilities, expectations, and rights of each party. When one party fails to perform as promised, a breach of contract occurs.

In Illinois, a breach of contract gives the injured party the right to seek damages. The goal of these damages is to place the non-breaching party in the position they would have been in if the contract had been fulfilled properly.

The type of damages available depends on the details of the agreement and the nature of the violation. Courts in Illinois recognize several distinct categories of damages that can be awarded in breach of contract cases.

What Are Compensatory Damages?

Compensatory damages are the most common type of recovery in breach of contract lawsuits. They are meant to cover the actual financial losses suffered by the non-breaching party.

For example, if a supplier fails to deliver materials on time, forcing a business to buy replacements at a higher cost, the additional expense can be recovered as compensatory damages.

There are two types of compensatory damages. Direct damages cover losses that flow directly from the breach itself, such as unpaid invoices or the cost of replacement goods. Consequential damages, also known as special damages, address losses that were reasonably foreseeable when the contract was made. For example, if a delayed shipment caused a missed deadline that led to lost business, those lost profits could be recovered as consequential damages.

Courts will typically award compensatory damages when the financial harm can be proven with documentation, such as invoices, receipts, or profit and loss records.

What Are Liquidated Damages?

Liquidated damages are damages that the parties agree to in advance and include in the contract itself. These clauses specify how much money must be paid if one side fails to meet certain obligations.

For instance, a contract might state that if a contractor fails to complete a project by a certain date, they must pay $500 per day in liquidated damages until the work is finished.

For a liquidated damages clause to be enforceable under Illinois law, it must represent a reasonable estimate of potential losses, not an unfair penalty. If the amount seems excessive or unrelated to the harm caused, the court may refuse to enforce it.

What Are Nominal Damages?

Sometimes, a party technically breaches a contract but causes little or no financial harm. In those cases, the court may award nominal damages. This is a small, symbolic sum (often just a few dollars) to acknowledge that a breach occurred.

Nominal damages serve as a legal recognition that one party failed to meet their obligations, even if the other party did not suffer measurable losses.

What Are Restitutionary Damages?

Restitutionary damages focus on fairness rather than compensation. The goal is to prevent the breaching party from being unjustly enriched by their wrongdoing. In some cases, a court may order the rescission of the contract, meaning it is canceled and both parties are returned to their original positions as if the agreement never existed. If one party received money, goods, or services under the contract, they may have to return them or pay restitution equal to their value.

For example, if a client paid for services that were never provided, the provider could be required to refund that payment under restitutionary principles.

Can You Get Punitive Damages for Breach of Contract?

Generally, punitive damages are not awarded in ordinary breach of contract cases in Illinois. The purpose of contract law is to compensate the injured party, not to punish the breaching party.

However, punitive damages may be available if the breach also involves fraud, malice, or willful misconduct that goes beyond a simple failure to perform. For example, if one party deliberately deceived the other about the terms of the agreement or engaged in fraudulent behavior, a court could award punitive damages to discourage similar conduct in the future.

Because punitive damages are rare and highly fact-dependent, it is essential to consult a business attorney to evaluate whether your case qualifies.

How Are Damages Calculated in a Breach of Contract Case?

The amount of damages depends on the specific facts of the case, including:

• The financial harm caused by the breach
• Any costs the non-breaching party incurred to fix or mitigate the problem
• Whether the parties agreed to limits or caps on damages in the contract

Courts expect both parties to act reasonably. If the injured party could have taken simple steps to reduce their losses but did not, the damages awarded may be reduced.

Contact a Naperville Contract Litigation Attorney

If your business has suffered losses because of a breach of contract, you need a legal advocate who understands both the law and the realities of running a company.

At The Gierach Law Firm, our experienced Naperville business lawyer represents clients in a wide range of contract disputes, from simple payment disagreements to complex commercial litigation. We can review your contract, assess your options, and pursue the compensation or other remedies you deserve.

Call 630-756-1160 to schedule a consultation and discuss how we can protect your business interests.