Which type of damages is awarded for losses directly caused by a breach of contract?

The correct answer is compensatory damages. These damages are specifically designed to reimburse a party for losses that directly result from a breach of contract. Their purpose is to put the injured party in the position they would have been in had the breach not occurred.

Compensatory damages can cover a variety of losses, including direct financial losses such as costs incurred as a result of the breach and lost profits. By awarding these damages, the legal system seeks to ensure that the party harmed by the breach is made whole to the extent possible.

Consequential damages, another type of damages mentioned, include losses that are not directly caused by the breach but instead occur as a secondary effect. These are not automatically awarded, as they generally require evidence that the breaching party was aware of the potential for such losses when the contract was formed.

Punitive damages are not typically awarded in breach of contract cases as their purpose is to punish wrongdoing rather than to compensate the non-breaching party. Nominal damages are symbolic sums awarded when a breach of contract occurs, but there is no significant loss to compensate. Thus, compensatory damages are the most suitable and accurate response for losses directly caused by a breach of contract.