While ‘damage’ is the loss suffered by the aggrieved party due to broken promises in contract, ‘damages’ are the compensation levied on the wrongdoer to make good such loss.
Instead of asking the non-compliant party to specifically perform the contract by fulfilling his obligation, the court directs him to compensate the aggrieved party for out-of-pocket expenses incurred by such breach.
Damages are an attempt by the court to just make good the loss of the aggrieved party to the contract. The purpose is compensation and not punishment. That is why the court can direct damages to the maximum extent of the actual loss and never in excess of the same. Higher compensation would have amounted to punitive damages, which, is not permitted by law. The court seeks to restore the aggrieved party to the position he would have enjoyed in the event of fulfillment of the contract.
In purchase or sale contracts the differential price is the measure of damages.
However, in case of fraud and deceit punitive damages may be awarded. In criminal jurisdictions exemplary damages are awarded as fines to discourage crimes.
