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Law

What are Compensatory Damages?

By Felicia Dye
Updated May 17, 2024
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In legal terms, damages are monetary awards granted by a court. There are different types of damages that a person who has been wronged can receive. One type, known as compensatory damages, are awards that attempt to compensate one person for losses caused by another. Costs covered by this category of damages can include repair of property, emotional distress, and lost wages.

Compensatory damages are awarded in civil cases. These damages can be awarded by either a judge or a jury. The purpose of these awards is to replace what a person has lost. These efforts are generally based on fair market value and not purchase price. When an award is based on fair market value, this means that it is assessed to determine its worth at the time when it was destroyed or damaged.

A person may also be awarded compensatory damages for losses associated with the inability to use an item. This can be viewed as part of the fair value. Consider, for example, that a drunk driver crashes into a building that houses a beauty salon. A court may deem it fair for the drunk driver not only to pay for repair to the building, but he may be ordered to compensate the workers for lost wages, as well.

Compensatory damages should only compensate a person for what she has lost. The person who has been wronged should not expect any amounts above that. There are damages that are meant to punish individuals who cause harm to others or their property, but those fall into a different category. Compensatory damages are not used for this purpose. They are used to restore the person who was wronged to the position where she was before the damaging incident occurred.

A person’s losses do not always pertain to physical property. In some cases, compensatory damages cover items that cannot be photographed, such as emotional distress or pain and suffering. This is done because if one person causes another to lack peace of mind or causes another to be in pain, the one who is wronged is still recognized as suffering losses. A good example of an instance when such damages would apply includes a case where a person is permanently disabled due to injury by another.

In order to receive compensatory damages, a person must prove that harm was done by the person that she accuses. Harm or destruction of physical property is generally much easier to prove and to be awarded than intrinsic harm, such as emotional distress.

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Discussion Comments

By sunnySkys — On May 14, 2012

I've always wondered how judges decide how much money to give someone for "emotional distress." Because you can't really quantify emotional distress!

If someone has damaged your car, you can go to a qualified mechanic and find out how much it's going to cost to fix it. Then you get a solid number for damages! But emotional distress is a lot more subjective.

I suppose you could have a psychiatrist testify about how damaged the plaintiff is. Or you could decide on the damages based on how much work the plaintiff has missed because of their emotional state.

Still, it must be a hard decision for a judge to make!

By Monika — On May 13, 2012

@JessicaLynn - I took an introductory law class when I was in college, and that sounds right to me. You can definitely experience various civil penalties for breaching a contract.

Also, I believe judges look at exactly what damages were caused by the defendant when they decide what kind of damages they award to the plaintiff. As the article said, a judge can also grant the plaintiff punitive damages.

Punitive damages are intended to go above and beyond compensation to the injured party. They are also used as punishment to the defendant. Although a civil court can't send a person to jail, they can definitely punish defendants in other ways!

By JessicaLynn — On May 12, 2012

I believe a person can also receive compensatory damages due to a breach of contract. Breach of contract damages are paid by one of the parties to the contract, because there are a ton of ways someone can be damaged if a person they have a contract with backs out!

For example, if a store has a contract with a factory to purchase a certain number of an item for a certain price, they will lose money if the factory fails to hold up their end of the bargain. The store won't be stocked with the item and will be unable to make profit. So compensatory damages make sense in a case like that.

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