Ace the Contracts & Sales Bar Challenge 2026 – Seal the Deal with Style!

Incidental damages are best characterized as costs that arise naturally from a party's breach of contract. They encompass expenses that a non-breaching party incurs while mitigating the effects of the breach or completing the contract in a different manner, such as additional shipping fees or costs incurred for replacing goods that were supposed to be delivered. The definition emphasizes that these damages are directly linked to the breach and are reasonable in scope. Therefore, the recognition that incidental damages arise specifically from the breach and relate to the costs incurred is what makes this choice accurate.

Other descriptions, such as those suggesting that incidental damages are punitive or applicable only in commercial contracts or written agreements, do not capture the essence of what incidental damages are. Incidental damages are meant to be compensatory rather than punitive and can arise in both commercial and non-commercial contracts, as well as in both written and oral agreements. Thus, understanding that incidental damages are inherently tied to the extra costs experienced because of a breach clarifies why the chosen description is the best fit.