How are damages typically calculated in contract law?

In contract law, damages are generally calculated using the concept of expectation interest, which aims to put the injured party in the position they would have been in had the contract been fully performed. This means that the compensation awarded reflects the expected benefits that the non-breaching party anticipated from the contract. By focusing on expectation interest, the law seeks to honor the intentions of the parties and ensure that the non-breaching party is made whole, or restored to their expected position.

This approach aligns with the underlying principle of contract law, which is to uphold agreements and provide an appropriate remedy when one party fails to fulfill their promises. The calculation often includes lost profits, consequential damages, and any other losses directly tied to the breach, rather than simply covering costs that might not reflect the true value or benefits of the contract.

The other options do not capture the primary focus of compensatory damages in this context. For instance, punitive damages are not relevant here because they are intended to punish the breaching party rather than compensate the injured party. Additionally, while actual costs incurred play a role in determining damages, they do not fully encompass the expectation interest that is central to calculating the compensation owed for breach of contract. Lastly, using market value may apply in some specific