Nominal damages, typically in the neighborhood of $1 or $2, are a form of legal monetary compensation designed to showcase that one party committed an unlawful act against another that doesn’t require a significant compensatory award. In part one and part two of this four-part series, the Nashville construction litigation attorneys at Cotney Construction Law introduced nominal damages and compared them to other more common types of damages like compensatory damages, liquidated damages, punitive damages, and restitution. Now, we will discuss how nominal damages can hurt or harm you depending on which side of a case you fall on.
The Purpose of Nominal Damages
If you’re still scratching your head because you don’t understand why nominal damages are important—don’t worry, you’re not alone. It’s easy to shrug off the idea of paying $2 to bring a dispute to a close. In fact, it almost sounds like a “get out of jail free card.” Unfortunately, the true purpose of nominal damages is frequently skewed and mitigated. The inherent risk of being forced to pay nominal damages is that it is the equivalence of an admission of guilt.
For the plaintiff, nominal damages verify that there was sound legal backing for the filing of a lawsuit. It also proves that the defendant’s behavior or actions were wrong. Although there was virtually no financial loss, the defendant must still accept responsibility for their wrongdoing. When a contractor is forced to pay nominal damages, it doesn’t hurt their wallet, it hurts their reputation. At the end of the day, the way a contractor’s business is perceived is just as valuable as the profits they bring in. Reputation is important in human psychology and the way we interact with the people around us.
Nominal Damages Can Lead to Punitive Damages
Nominal damages help establish that some form of wrongdoing has transpired between two contracted parties. Once this has been established, it opens the gates for punitive damages. If a plaintiff wants to be awarded for punitive damages, that have to be able to showcase that they were awarded compensatory, nominal, or restitution damages first. This helps showcase that the defendant is legally responsible for their actions, which allows legal representatives to build a case. If they can prove that these damages are the result of bad faith or malice, then nominal damages can lead to more expensive punitive damages. In tort claims, nominal damages help designate the number of affected parties being considered for monetary awards.
To learn more about why plaintiffs typically want nominal damages and when these damages can be assessed, read part 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.