According to Cornell Law School, nominal damages are “used when a judge or jury finds in favor of one party to a lawsuit—often because a law requires them to do so—but concludes that no real harm was done and therefore awards a very small amount of money.”
This small amount of money, typically only $1 or $2, is often regarded as a symbolic gesture, but the reason judges award nominal damages is quite significant. Contractors might scoff at the idea of nominal damages when working on multi-million dollar building projects, but the consequences of being forced to pay nominal damages can affect your business in other ways unrelated to money. In this four-part series, the Nashville construction lawyers at Cotney Construction Law will explain the significance of nominal damages.
Nominal Damages: Less Common and More Confusing
If a contractor were to breach the contract they had established with an owner, they would likely be pleased to discover that they were only being forced to pay nominal damages. For example, if the contractor completed the project one week after the agreed-upon date, they could be responsible for paying liquidated damages to the owner to make up for profit losses resulting from the late completion. However, if the judge assessed that the potential for lost profits was negligible, they might consider charging nominal damages instead.
When this occurs, the defendant is often left with a slight feeling of confusion and a tangible sense of relief. After all, breaching a contract is a big deal that usually results in costly consequences. However, this small fine is designed to do more than cut into your fast-food budget. In some cases, nominal damages are coupled with the cost of legal fees which can add up to much more than $1. Paying nominal damages can also be interpreted as an admission of wrongdoing.
Small Fine, Big Deal
Nominal damages are like a slap on the wrist for a common crime. You may have committed a minor, illegal act and your record will reflect that, but you aren’t going to be spending the next 90 days or 90 years in prison. Although the punishment wasn’t severe, the fact that you now have a criminal record can affect you in other ways. Nominal damages act in very similar fashion. We will discuss this in greater detail in parts two, three, and four.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.