What are damages intended to achieve in contract law?

In contract law, damages are primarily intended to compensate the injured party for losses resulting from the breach of contract, effectively putting them in the position they would have been in had the contract been fully performed. This principle is known as the "expectation interest," which focuses on the parties' agreed-upon benefits if the contract had been fulfilled.

Compensation can cover a range of losses, including direct damages (the actual loss incurred), consequential damages (additional losses that occurred as a result of the breach), and sometimes even incidental damages (minor costs incurred that are a direct response to the breach). The goal is to restore the injured party to their rightful position, rather than to impose penalties, allow renegotiation, or provide unjust financial gain.

Understanding this objective is crucial, as it emphasizes the compensatory nature of damages in contract law, distinguishing it from punitive damages, which serve to punish wrongdoing in tort law but are not typically applicable in contract scenarios.