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What are "incidental damages" in the context of a breach of contract?

Punitive damages imposed by the court

Costs incurred directly due to the breach

Incidental damages refer to costs that arise directly as a result of a breach of contract. When one party fails to meet their contractual obligations, the non-breaching party may face additional expenses that are directly related to that breach. These could include costs related to finding a replacement for the goods or services that were not provided, or expenses incurred while mitigating the effects of the breach, such as moving costs or other logistical adjustments.

This understanding is crucial because it differentiates incidental damages from other types of damages, such as punitive damages, which seek to punish the breaching party rather than compensate for actual losses. It also contrasts with lost profits, which may represent a different category of damages known as consequential damages, stemming from indirect losses linked to the breach. Essentially, incidental damages cover the necessary and reasonable expenses incurred by the non-breaching party as a direct outcome of the breach.

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Damages calculated based on lost profits

Losses that are not directly related to the breach

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