What type of damages compensates the non-breaching party for losses actually sustained as a result of a breach?

Compensatory damages are specifically designed to compensate the non-breaching party for the actual losses they have experienced due to a breach of contract. These damages are intended to put the injured party in the position they would have been in had the breach not occurred, effectively covering both direct and foreseeable indirect losses. This includes a range of losses such as lost profits, costs incurred due to the breach, and any other financial impacts directly linked to the non-performance or improper performance of the contract terms.

By contrast, incidental damages refer to the additional costs that arise as a result of the breach but do not encompass the full extent of the direct losses. Punitive damages are awarded not to compensate for losses but to punish the breaching party for their misconduct and deter similar behavior in the future; thus, they do not serve the purpose of compensating the non-breaching party for their losses. Nominal damages are a small sum awarded when a breach has occurred but no substantial loss has been demonstrated, again not fitting the context of compensating actual losses.