Understanding Damages in Civil Lawsuits: Contracts Vs. Torts

If you are a party to a civil lawsuit or anticipate becoming one, it is important to understand the “damages” that can be awarded to a prevailing party to properly manage your expectations. This article describes how damages are awarded, introduces two common categories of civil claims (“breaches of contract” and “torts”), and describes the types of damages that can be awarded for each category.

What are “damages,” and how are they awarded?

In most civil lawsuits, the plaintiff’s goal is to obtain a monetary award, or “damages,” to compensate them for an injury. To obtain this award, a plaintiff must prove one or more legal claims to a judge or jury.

A legal claim consists of a series of facts, or “elements,” that prove the plaintiff was injured by the defendant. An injury may be physical or financial, relate to the loss of a legal right, or result from a party’s failure to follow the terms of a contract. The type of injury determines which claims should be raised. If a plaintiff proves every element of a claim, they will prevail on that claim and obtain an award of damages at the conclusion of the trial.

What is a “breach of contract,” and how is a contract claim proven?

A contract is an oral or written agreement between at least two parties that creates obligations or duties among them. Hall v. State Compensation Ins. Fund, 387 P.2d 899, 902 (Colo. 1963).

Examples of contracts you may encounter in your daily life include residential leases, telephone plans, and insurance policies. When a party to a contract fails to “perform” a contractual obligation, that party may be liable to another for breach of contract.

To prove a breach of contract claim, the plaintiff must show the following elements:

• The contract exists
• The plaintiff performed, or the circumstances justified the plaintiff’s failure to perform
• The defendant failed to perform
• The plaintiff was damaged because the defendant failed to perform

W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992).

What is a “tort,” and how is a tort claim proven?

The term “torts” refers to a broad class of claims that are based on “tortious,” or wrongful conduct that causes injury and subjects the offender to legal liability. Resolution Tr. Corp. v. Heiserman, 898 P.2d 1049, 1054 (Colo. 1995).

Tort claims are highly circumstantial and can be based on either an act or a failure to act. To be deemed tortious, conduct must be prohibited by law or recognized by prior court decisions as a tort.

Torts fall into three general categories:

• Intentional: purposeful conduct, such as theft
• Negligent: unreasonable conduct, such as failing to pay attention while driving a vehicle
• Strict liability: Acts or omissions for which an offender is legally liable regardless of whether they acted reasonably or intended for harm to result (i.e., an unprovoked pet attacks and injuries a neighbor)

See, e.g., Wells Fargo Realty v. Uioli, 872 P.2d 1359, 1365 (Colo. App. 1994) (distinguishing negligent and intentional conduct); Lui v. Barnhart, 987 P.2d 942, 944-45 (Colo. App. 1999) (distinguishing negligent and strict liability conduct).

While there are many types of tort claims, a plaintiff must generally prove as the elements for each tort that:

• The defendant owed a duty, or “standard of care” to the plaintiff
• The defendant breached that duty by feeling to meet the standard of care
• The plaintiff was injured as a result of that breach of duty

See, e.g., Vigil v. Franklin, 103 P.2d 322, 325 (Colo. 2004) (describing elements of a negligence claim).

What types of damages can be awarded for breaches of contracts and torts?

Colorado recognizes several categories of damages, including “general,” “special,” and “exemplary” damages, to compensate a plaintiff for their injuries.

General damages naturally and necessarily result from an injury. Core-Mark Midcontinent Inc. v. Sonitrol Corp., 370 P.3d 353, 360 (Colo. App. 2016). They include damages an ordinary person of common experience would expect to result from the injury. Id. An example could include the cost of fixing a parked car that a negligent driver collided into.

Special or “consequential” damages also naturally result from an injury but would not necessarily result from that kind of injury in other cases because they are attributable to unique and specific circumstances. Id. In the example above, special damages could include the cost of replacing a valuable item inside the car that was destroyed by the impact.

General and special damages can be awarded for both breach of contract and tort claims to compensate the injured party for the “reasonably foreseeable” or probable consequences of the conduct. Id.

For contract claims, however, these damages can only be awarded for consequences that were foreseeable when the contract was formed, while these damages can be awarded for tort claims for damages that were foreseeable at any time prior to the conduct. Vanderbeek v. Vernon Corp., 50 P.3d 866, 871 (Colo. 2002); see also Ute Water Conservancy Dist. V. Fontanari, 524 P.3d 308, 318 (Colo. App. 2022).

Exemplary or “punitive” damages punish parties for particularly egregious behavior by assessing financial penalties against them.  These damages can only be awarded if (1) they are provided by statute and (2) general or special damages are also awarded. Mortg. Fin., Inc. v. Podleski, 742 P.2d 900, 902-03 (Colo. 1987); Kaitz v. District Court, 650 P.2d 553 (Colo. 1982). Situations where an award of exemplary damages may be appropriate include those that support a claim for theft under C.R.S. § 18-4-405, and those that demonstrate “fraud, malice, or willful and wanton conduct” under C.R.S. § 13-21-102.

Why are contract and tort claims treated differently?

Contract and tort claims are based on different “duties” and reflect the policies or values recognized by the law. Contractual duties are created by contract terms, while tort duties are created by laws. Contract law protects only the parties to an agreement by enforcing the contract’s terms, which reflect the parties’ original expectations. Its purpose is not to punish or acknowledge the “fault” of the breaching party but to compensate the injured party by placing them in a position similar to the one they would be in without the breach of contract. Id.; see also Mortg. Fin., Inc., 742 P.2d at 903.

Tort law, by contrast, protects the general public by enforcing legal duties of care that encourage socially beneficial conduct and discourage wrongful conduct. Giampapa v. Am. Fam. Mut. Ins. Co., 64 P.3d 230, 250-51 (Colo. 2003). Like contract law, one purpose of tort law is to place the injured party in a position similar to the one they would be in without the tort.  Unlike contract law, the other purpose of tort law is to punish the party responsible for the injury. Id.

Because tort law focuses on the fault of the defendant and the wrongful quality of the act, a more extensive range of damages is often available for tort claims than for contract claims, which focus solely on the fact that the breach occurred. Giampapa, 64 P.3d at 250-51. For the same reasons, a plaintiff injured by conduct that breaches a contract can usually sue the defendant only for contract claims, with some exceptions. See Town of Alma v. Azco Constr., Inc. 10 P.3d 1256, 1264 (Colo. 2000) (describing the economic loss rule).

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