How to Calculate TYPES OF Damages
The two most important components of a legal case are liability and damages.
LIABILITY + DAMAGES = LEGAL CASE
These factors are analyzed from many different angles.
TYPES OF DAMAGES
Types of damages are ranked in the following order from highest to lowest: Gross, Recoverable and Net, kind of like your tax return!
When quantifying damages, you begin with Gross Damages, reduce that by certain factors to get Recoverable Damages, and end up with Net Damages, what you may net after deducting the expenses of your case. Looking at your damages and case costs in this triangular way makes you a Realist, instead of a Dreamer – an essential step in evaluating your case.
- Gross Damages: All damages caused by this event.
- Recoverable Damages: Gross Damages reduced by any benefit received and any responsibility you have for causing your damages.
- Net Damages: Your Recoverable Damages reduced by factors related to contract provisions and the value of the time you will invest in your case.
Lawsuit Analyzer© uses Recoverable Damages (your most likely outcome) to arrive at your Case Value and Settlement Value. Net Damages are to show you what you are likely to net after your legal process is complete.
It takes a four-step process to arrive at these all-important numbers:
- Step 1: What are your Gross Damages?
- Step 2: What are your Recoverable Damages?
- Step 3: Is there a damage defining provision that pertains to your dispute?
- Step 4: What are your Net Damages?
Phase 5 of Lawsuit Analyzer© quantifies damages assessment, along with several other assessments in Comprehensive Case Analysis:
THE BACK STORY
The claimant, an author, hired a book printer to print his new self-published book. The price was $18,000 paid in advance. The contract included a Limitation on Damages clause and an Attorney Fee award provision. The books were delivered, and two-thirds of them were defective. The book printer said the books the author claimed were defective are within industry standard.
Results Carried Forward:
Phase 2, Damages Assessment. The author’s score is only ten since estimated Net Damages are above the Small Claims Court limit and he did not elect to decrease case value to fit the limit (which would have earned him 50 points). If not a Small Claims case, score is based on the amount of Net Damages with lower values earning less points. See more on how the author’s damages were arrived at under Comprehensive Case Assessment.
Phase 3, Legal Options Assessment is only 50 out of 190 points primarily because the case will travel the long and complex road through the upper court system (which we refer to as the House of Horrors) since the value is above the Small Claims Court limit in the state where the case will be filed and since there is no Mediation or Arbitration provision, thus the House of Horrors will be the forum for the case. The 50 points earned is due to having an Attorney provision so if the author is represented by counsel and wins, he will not be out attorney fees.
Phase 4, Collectability Assessment of 150 is the highest possible score due to the fact that the printer is a corporation. See our Collectability page for more on how collectability is assessed.
Comprehensive Case Assessment:
Feasibility Assessment is 76% out of 100% due to the low scores in Phase 2, Damages, and Phase 3, Legal Options. In lay terms, the case feasibility reduction is because the author will have to take a reasonably low-valued case through a two or more-year battle in the court system to obtain a judgment. He’s got an attorney and an Attorney Fee provision, but still it will be a long, stressful, adversarial journey.
Recoverable Damages: Gross damages are reduced by one-third since one-third of the printing was satisfactory, leaving Recoverable Damages of $12,000. The contract between the parties contains a Limitation on Damages provision capping damages at $18,000, the contract price. Since Recoverable Damages do not exceed that amount, they remain at $12,000.
🍪 Smart Cookie Tip: If the damage defining provision had been Liquidated Damages, the amount of Recoverable Damages would have been the Liquidated Damages amount so if the Liquidated Damages amount were $15,000, Recoverable Damages would be $15,000 not $12,000 because Liquidated Damages is the parties’ agreement in advance that if there is a dispute, the damages will be liquidated to exactly the amount specified.
Net Damages: Recoverable Damages are reduced by several value reducing factors built into the algorithm, in this case $2,600, leaving estimated Net Damages of $10,400.
🍪 Smart Cookie Tip: Net Damages are so close to the $8,000 Small Claims Court limit that our author should go to Plan B, reducing his claim to the Small Claims Court limit. In this manner, he can represent himself and be done with it all quickly. [Our Lawsuit Analyzer users get 2 links so they can re-evaluate their case in retrospect and set up a Plan B.]
Head over to our Settlement page to see how the Pre-litigation Settlement Amount factored into this claimant’s settlement process.