Damage and Damages: Definition, Example and Related Terms
What is a Damage and Damages ?
In the world of commercial contracts, 'Damage' and 'Damages' are two words that play a big role. Even though they sound similar, they have different meanings. 'Damage' refers to the actual harm or loss that has happened because of someone’s action or an unfortunate event. For example, if a delivery truck carrying a company's products has an accident and the products get destroyed, that's damage. 'Damages', on the other hand, is the money that one party has to pay to the other because they didn’t do what they promised to do in the contract, or they did something they weren’t supposed to do. For example, if a company was supposed to deliver 100 computers to a business, but they only delivered 80, the business could ask for 'damages' for the 20 computers that were not delivered. Now, it's important to remember that 'damages' in a contract is not a punishment. It's just a way to make things fair and put the injured party in the position they would have been if the contract had been performed correctly.
Scenario Description A software company was supposed to deliver a customized software solution to a client by a certain date. However, they failed to meet the deadline. In this case, the client may file a claim for 'damages' against the software company for failing to meet the agreed deadline. The client can claim for the extra costs they had to incur because of the delay, like the cost of hiring another company to do the work or the lost profits if they were depending on the software to start a new project. A manufacturing company orders a specific machine part from a supplier. However, the supplier delivers a faulty part, causing damage to the machine when it was installed. Here, 'damage' refers to the harm caused to the machine due to the faulty part. The manufacturing company can claim 'damages' from the supplier for the cost of repairing the machine and any other losses they suffered because the machine was not working, such as lost production time.