Under California Civil Code 3300, if someone breaches a contract with you, you can recover the amount that compensates you for all harm proximately caused by the breach, plus losses that would ordinarily result from it. The statute is a single sentence, but it opens two lanes of recovery: direct losses tied to the broken promise itself, and consequential losses that flow from your particular circumstances. The goal is to put you in the financial position you would have occupied if the other side had performed.1Justia. CACI No. 350 – Introduction to Contract Damages Not to punish. Not to hand you a windfall.
The statute reads that damages for breach are “the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.”2California Legislative Information. California Civil Code 3300 – Damages for Breach of Contract Everything else in a California contract damages analysis is built on that sentence and a handful of companion statutes.
Direct Damages: The Value of the Deal You Lost
Direct damages cover the immediate financial loss the breach caused. The classic measure is the difference between what you were promised and what you actually received. If a seller agreed to deliver goods for $10,000, never shipped them, and you had to buy substitutes for $13,000, your direct damages are $3,000. California courts compare the contract price to the market value of the goods or services at the time of the breach.1Justia. CACI No. 350 – Introduction to Contract Damages
There is a ceiling. Civil Code 3358 provides that you cannot collect more in damages than you would have gained if both sides had fully performed.3California Legislative Information. California Civil Code 3358 If the contract would have netted you $50,000 in profit, $50,000 is the cap, even if the breach caused chaos worth more on paper.
Consequential Damages: Foreseeable Ripple Effects
Consequential damages cover the downstream losses tied to your specific situation. Lost profits are the most common example. If a supplier misses its delivery date and your factory sits idle for two weeks, the profits you lost during the shutdown can be recoverable as consequential damages.
The gating question is foreseeability. You can recover these losses only if the breaching party knew, or should have known, about the risk of those specific consequences when the contract was signed. California courts apply both a subjective test (did they actually know?) and an objective one (should they have known?).2California Legislative Information. California Civil Code 3300 – Damages for Breach of Contract Written notice about the stakes helps. If you told a supplier that late delivery would halt your production line, foreseeability is far easier to prove than if you assumed they’d figure it out.
Consequential damages are not presumed. You have to show the causal link and the foreseeability at the time of contracting.
What Section 3300 Will Not Get You
Punitive damages are off the table in a straight breach of contract case. Civil Code 3294 limits them to actions “for the breach of an obligation not arising from contract.”4California Legislative Information. California Civil Code 3294 No matter how outrageous the breach, the contract claim alone will not support them. If the conduct also amounts to fraud or another tort, a separate claim might, but that is a different theory of recovery.
Emotional distress damages are also generally unavailable in ordinary contract disputes. California courts recognize a narrow exception for contracts whose subject is personal comfort, happiness, or welfare rather than pure financial interests. Insurance contracts are the classic example. In most commercial contracts, emotional distress claims will be rejected.
Nominal Damages When Nothing Was Actually Lost
Sometimes a breach happens but causes no measurable financial harm. Civil Code 3360 covers this: “When a breach of duty has caused no appreciable detriment to the party affected, he may yet recover nominal damages.”5California Legislative Information. California Code CIV 3360 The award is usually a token, often a dollar. It confirms the breach occurred and preserves the legal principle, which can matter when you need to establish a right rather than collect a check.
Liquidated Damages Clauses
If your contract sets the damages amount in advance, Civil Code 1671 controls whether that clause is enforceable. For most commercial contracts, the clause is presumed valid, and the party challenging it must show the amount was unreasonable when the contract was signed.6California Legislative Information. California Civil Code 1671
Consumer and residential lease contracts are treated more strictly. When the clause targets a consumer buying personal property or services for household use, or a residential tenant, it is void unless actual damages would be impracticable or extremely difficult to calculate and the agreed amount is a reasonable estimate.6California Legislative Information. California Civil Code 1671 Clauses that function as penalties rather than compensation are unenforceable regardless of contract type.
Prejudgment Interest
Interest can add real money to your recovery. Under Civil Code 3287(a), if your damages are a fixed amount or can be calculated with certainty, you are entitled to interest from the date the right to recover vested, typically the date of the breach. That right is automatic for liquidated claims like unpaid invoices or a specific contract price. For unliquidated claims, where the amount cannot be pinned down until trial, Section 3287(b) gives the court discretion to award interest from a date no earlier than when the lawsuit was filed.7California Legislative Information. California Civil Code 3287
Attorney’s Fees
California follows the American Rule: each side pays its own lawyers unless a statute or the contract says otherwise. Civil Code 1717 adds an important twist. If your contract has an attorney’s fees clause, even one that names only one party as the beneficiary, courts treat it as reciprocal. The prevailing party on the contract claim gets fees, whichever side that turns out to be.8California Legislative Information. California Civil Code 1717
The court decides who prevailed based on who obtained greater relief. If the case settles or is voluntarily dismissed, there is no prevailing party for Section 1717 purposes and no fees are awarded on that basis.8California Legislative Information. California Civil Code 1717
Your Duty to Mitigate
A breach does not entitle you to watch losses pile up. California law requires the injured party to take reasonable steps to reduce the harm. If a vendor cancels your supply contract, you need to look for an alternative rather than shutting down and suing for every dollar of lost revenue. You do not have to accept unreasonable substitutes or spend disproportionately, but you do have to try.
If you fail to mitigate, the court reduces your damages by the amount you could reasonably have avoided. If replacement goods were available for $5,000 above the contract price and you instead did nothing and lost $50,000 in profits, the court may cap recovery at that $5,000 difference. The breaching party bears the burden of proving you failed to mitigate.
Proving the Amount With Certainty
Civil Code 3301 sets a firm threshold: “No damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin.”9California Legislative Information. California Civil Code 3301 You have to show what kind of loss you suffered and that it came from the breach. Speculation will not carry the day.
Civil Code 3359 reinforces the point by requiring that damages be reasonable in all cases. Even where a breach and its link to your losses are established, the court will not award an amount that is unconscionable or grossly oppressive.10Justia. California Civil Code – Article 4, General Provisions The burden is on the party claiming damages, and the court will not fill in gaps in your proof.
How Long You Have to File
The deadline depends on how the contract was formed. For written contracts, the statute of limitations is four years from the date of breach.11California Legislative Information. California Code of Civil Procedure 337 For oral contracts, you have two years.12California Legislative Information. California Code of Civil Procedure 339 Miss the deadline and the merits of your claim will not save it.