What are damages awarded to place an injured party in the same position as before a contract was entered into called?

The term that describes damages awarded to reimburse an injured party and restore them to the position they were in before the contract was entered into is known as actual damages. Actual damages are intended to compensate for the actual loss incurred as a result of a breach of contract, covering both the direct losses and any consequential losses that flow directly from the breach.

For instance, if a party fails to fulfill a contract, the injured party might face additional expenses or lost profits as a result of relying on that contract. Actual damages are calculated based on the specific losses suffered, ensuring that the injured party is restored to their original state, both financially and in contract terms, before the breach occurred.

This principle is critical in contract law, emphasizing the importance of fair compensation based on real losses rather than abstract or punitive measures. Other forms of damages, such as punitive damages, aim to punish wrongdoing rather than compensate for actual losses, which distinguishes them from actual damages.