Breach of Contract Damages in New York: What You Can Actually Recover

I'll be straight with you: the question I hear most often from business owners isn't "can I sue?" It's "how much will I actually get?" And honestly? Most attorneys dodge this question with vague answers about "it depends" and "every case is different." That's not particularly helpful when you're trying to decide whether spending $15,000 in legal fees makes sense to recover $30,000.

So let's talk real numbers, real expectations, and what New York law actually allows you to recover when someone breaks their contract with you. Whether you're running a business in Brooklyn, closing deals in Manhattan, or managing operations in Queens, the rules are the same—but understanding them can mean the difference between a worthwhile lawsuit and an expensive lesson.

The Basic Rule: You Get What You Lost (And Nothing More)

Here's the fundamental principle that governs every breach of contract case in New York: damages are meant to put you in the position you would have been in if the contract had been performed. Not better. Not worse. Just... whole.

This sounds simple until you realize what it actually means. You don't get to punish the other side for breaking their promise. You don't get extra money because they were jerks about it. You get compensation for your actual, provable losses—and courts are strict about the "provable" part.

New York recognizes several categories of damages, and understanding the differences is crucial because each comes with its own rules about what you need to prove and what you can recover.

Compensatory Damages: The Foundation of Every Case

Compensatory damages—sometimes called "general damages" or "direct damages"—are the backbone of any breach of contract claim. These cover the losses that flow directly and naturally from the breach itself.

What this looks like in practice:

Say you're a retailer in Queens who ordered $50,000 worth of inventory from a supplier. They never delivered. Your direct damages are straightforward: the $50,000 you paid (or the cost to buy the same goods elsewhere, whichever puts you in the position you should have been in).

Or maybe you hired a contractor to build out your Brooklyn storefront for $80,000. They abandoned the project halfway through. Your direct damages include what you've already paid them plus whatever it costs to hire someone else to finish the job—minus what you would have paid the original contractor anyway.

The key with compensatory damages is that they must be "reasonably certain." You can't just throw out a number and hope the court agrees. You need documentation: contracts, invoices, quotes from replacement vendors, financial records showing what you spent and what you lost.

Consequential Damages: Where Things Get Complicated

Here's where business owners often get frustrated. Consequential damages—also called "special damages"—cover the indirect losses that ripple out from a breach. And they're much harder to recover.

The classic example:

Your supplier fails to deliver the parts you need to fulfill a major customer order. You lose that customer. They were going to pay you $200,000 over the next year. Can you sue for that $200,000 in lost business?

Maybe. But only if:

1. The breach actually caused the loss (not some other factor)

2. You can prove the amount with reasonable certainty (not guesswork)

3. The other party knew or should have known this loss was possible when you signed the contract

   
   

That third requirement trips up a lot of business owners. If you never told your supplier how critical this delivery was, or that losing it would cost you a major account, they might not be on the hook for those downstream losses.

Consequential damages claims often fail because businesses can't meet the proof requirements. Courts want hard numbers, not projections. They want evidence the other side knew what was at stake, not assumptions.

Lost Profits: The Most Misunderstood Category

Lost profits are technically a form of consequential damages, but they deserve special attention because they're what most business owners really care about—and they're notoriously difficult to recover.

New York courts distinguish between two types of lost profit claims, and this distinction matters enormously:

Lost profits as "general" damages: If the entire purpose of the contract was to generate profits for you, and the breach directly destroys that profit opportunity, courts may treat lost profits as general damages. This makes them easier to prove because you just need to show a "stable foundation for a reasonable estimate."

Lost profits as "consequential" damages: If the lost profits come from a separate business arrangement affected by the breach, they're consequential. Now you need to prove all three requirements: causation, reasonable certainty, and foreseeability.

The practical difference:

Imagine you're a distributor. A manufacturer signs an exclusive deal to supply you with widgets at $10 each. You're going to resell them at $15 each. They breach and stop supplying you.

Your lost profits on those widget sales? Probably general damages—that was the whole point of the contract. But what about the customers who stopped buying other products from you because you couldn't get them widgets? That's consequential damages territory, and much harder to recover.

New businesses face an even tougher standard. If your company doesn't have a track record of profitability, courts are extremely skeptical of lost profit claims. How do you prove what profits you "would have" made when you've never made them before? Courts call these claims "speculative," and speculation doesn't win lawsuits.

What You Almost Certainly Can't Recover

Let's talk about the damages that business owners expect to get but almost never do.

Punitive Damages

Forget about them. In a breach of contract case in New York, punitive damages are almost never available. The only exception is when the breach also involves fraud that rises to the level of a "public wrong"—think systematic consumer fraud affecting thousands of people, not a business deal gone bad.

Even if the other side acted in bad faith. Even if they were dishonest. Even if they made your life miserable. Breach of contract isn't about punishment; it's about compensation.

Attorney's Fees

Under what's called the "American Rule," each side pays their own legal fees—win or lose. This is different from England, where the loser often pays the winner's costs.

There are exceptions:

• If your contract specifically says the prevailing party gets attorney's fees

• If a statute provides for fee recovery (rare in commercial cases)

• If the other side's conduct was "frivolous" under court rules

  
  

But absent one of these exceptions, even if you win your entire case, you're still paying your own lawyer. This is why the cost-benefit analysis of litigation matters so much. Winning a $40,000 judgment doesn't help much if you spent $35,000 in legal fees to get there.

Emotional Distress

Unless the contract was specifically designed to provide peace of mind (like certain insurance policies), you cannot recover damages for stress, anxiety, sleepless nights, or the emotional toll of dealing with a breach. Business contracts are about economics, not feelings.

Speculative Losses

"I think I would have made $500,000 if they hadn't breached" isn't going to cut it. You need actual evidence supporting your damage calculations. Projections without historical data, estimates without documentation, theories without proof—courts reject these consistently.

The Mitigation Requirement: Your Duty to Minimize Losses

Here's something that surprises a lot of business owners: New York law requires you to take reasonable steps to reduce your losses after a breach. If you don't, any damages you could have avoided get subtracted from your recovery.

What this means practically:

If a supplier stops delivering goods, you need to find a replacement reasonably quickly—not wait six months while your losses pile up. If a tenant breaches a commercial lease, you need to make reasonable efforts to re-let the space—you can't just leave it empty and sue for the full remaining rent.

The effort doesn't have to succeed. You just have to try. And "reasonable" depends on the circumstances—courts understand that finding a new supplier or tenant takes time.

But if you sit on your hands and let damages accumulate when you could have acted, don't expect to recover the full amount.

Prejudgment Interest: The Hidden Bonus

Here's something most business owners don't know: if you win a breach of contract case in New York, you're entitled to 9% annual interest on your damages, calculated from the date of the breach.

This is mandatory. The court doesn't have discretion to deny it. And in cases that take years to litigate, this interest can add up to a significant amount. If your contract specifies a different interest rate for defaults or late payments, that rate might apply instead—but only if it's specifically designated as "prejudgment interest." A general interest provision in a loan agreement doesn't override the statutory 9%.

When Money Isn't Enough: Specific Performance

Sometimes what you really need isn't cash—it's the actual performance promised under the contract. New York courts can order "specific performance," forcing the other party to do what they agreed to do.

But there's a catch: this remedy is only available when money damages would be inadequate.

Where specific performance is common:

Real estate deals. Every piece of property is considered unique, so if a seller backs out, a court might order them to complete the sale. You can't just go buy "another" 123 Main Street.

Where specific performance is rare:

Service contracts. Courts won't force someone to work for you. Aside from the practical problems of supervising unwilling performance, there are constitutional concerns about compelling labor.

Where it gets interesting:

Unique goods, rare items, or custom manufacturing where you can't just get the same thing elsewhere. If you contracted for a one-of-a-kind piece of equipment and the seller refuses to deliver, you might have a specific performance argument.

Liquidated Damages: When the Contract Sets the Amount

Smart contracts anticipate breach and specify what happens. A "liquidated damages" clause sets a predetermined amount that will be owed if certain terms are broken.

The benefits: No arguments about proving losses. No expert witnesses calculating damages. Just apply the formula in the contract.

The limits: New York courts will enforce liquidated damages clauses only if:

• The amount is a reasonable estimate of anticipated damages

• Actual damages would be difficult to calculate

• The clause isn't a "penalty" designed to punish breach

  
  

If your liquidated damages clause is clearly excessive compared to any realistic harm, courts will throw it out. The line between "reasonable estimate" and "penalty" isn't always clear, which is why these clauses require careful drafting.

Where to Sue: NYC Court Options

NYC Civil Court: Handles cases up to $25,000. Lower filing fees (around $45-140 depending on the type of claim), faster resolution, but more limited procedures.

Supreme Court: Required for cases over $25,000 in NYC. Filing fees run around $210-305 to start, plus additional fees as the case progresses. This is a court of general jurisdiction that handles everything from simple contract disputes to complex commercial litigation.

Commercial Division: A specialized part of Supreme Court for sophisticated business disputes. In Manhattan, your case needs to meet a $500,000 threshold. In Brooklyn (Kings County) and Queens, the threshold is $100,000. These courts have judges experienced in commercial matters and special rules designed to move cases efficiently.

The Cost-Benefit Reality Check

Litigation costs for a breach of contract case:

Simple cases with clear liability and damages might cost $10,000-25,000 in attorney's fees through trial. Complex commercial disputes with contested facts, expert witnesses, and extensive discovery can easily run $50,000-150,000 or more.

Timeline:

NYC courts are busy. A typical breach of contract case might take 18-36 months from filing to trial. Commercial Division cases often move faster due to specialized procedures, but you're still looking at a year or more in most situations.

Collection risk:

Winning a judgment is great. Collecting it is another matter. If the defendant is broke, has hidden assets, or files for bankruptcy, your judgment might be worth the paper it's printed on.

The honest question to ask yourself:

If I spend X in legal fees and wait Y months, and have a realistic chance of recovering Z, does this make business sense? Sometimes the answer is yes. Sometimes walking away or negotiating a settlement is the smarter move.

Frequently Asked Questions

Understanding Damage Types

What's the difference between compensatory and consequential damages?

Compensatory damages cover your direct losses—what you paid, what it cost to fix the problem, the straightforward financial hit from the breach itself. Consequential damages cover the ripple effects: the customers you lost, the deals that fell through, the business opportunities that evaporated because of the breach. Compensatory damages are easier to prove; consequential damages require showing the other party knew or should have known those losses were possible.

Can I get punitive damages for breach of contract in New York?

Almost never. New York reserves punitive damages for cases involving fraud that affects the public at large—not ordinary business disputes. Even intentional, bad-faith breaches don't qualify. Contract damages are about making you whole, not punishing the other party.

What are nominal damages and when do they matter?

Nominal damages—typically $1—are awarded when you prove a breach occurred but can't prove any actual financial loss. They might seem pointless, but they establish that you were right, which can matter for reputation or for triggering attorney's fee provisions in some contracts.

Recovering Lost Profits

How do I prove lost profits in a New York breach of contract case?

You need documentation showing what profits you would have made, evidence that the breach caused the loss, and proof that these losses were foreseeable when the contract was signed. Historical financial records, industry data, contracts with customers, and expert testimony often come into play. Speculation and projections without supporting evidence won't cut it.

Are lost profits harder to recover for a new business?

Yes, significantly. Courts apply a stricter standard to new businesses because there's no track record to prove what profits "would have" been made. You'll need compelling evidence—signed contracts with customers, industry comparable, detailed financial projections with supporting assumptions—to overcome the skepticism.

What if my contract has a clause excluding consequential damages?

It's probably enforceable. New York courts generally respect contractual limitations on damages as long as they're clear and unambiguous. This means your lost profits claim might be dead on arrival if you signed a contract waiving consequential damages—which is why reading contracts carefully before signing matters.

Practical Considerations

Do I have to try to reduce my losses after a breach?

Yes. It's called the "duty to mitigate." You must take reasonable steps to minimize your damages—find a replacement supplier, re-let the property, seek alternative business. You don't have to succeed, but you have to try. Damages you could have reasonably avoided get deducted from your recovery.

Can I recover my attorney's fees if I win?

Only if your contract specifically provides for attorney's fee recovery, a statute applies (rare in commercial cases), or the other side's conduct was legally "frivolous." Otherwise, you pay your own lawyer regardless of outcome. This is a critical factor in the cost-benefit analysis of litigation.

What's the interest rate on breach of contract judgments in New York?

9% per year, calculated from the date of the breach. This is mandatory—the court must award it. On large claims that take years to litigate, this interest can add substantially to your recovery.

Filing and Process

Which court do I file in for a breach of contract case in NYC?

It depends on the amount. Claims up to $25,000 go to NYC Civil Court. Claims over $25,000 go to Supreme Court. If your claim exceeds $500,000 in Manhattan or $100,000 in Brooklyn or Queens, you may be eligible for the Commercial Division, which has judges specializing in business disputes.

How long does a breach of contract lawsuit take in New York?

Typically 18-36 months from filing to trial in Supreme Court. Commercial Division cases often move faster. Simple cases might settle earlier. Complex disputes with extensive discovery can take longer. Very few cases actually go to trial—most settle once both sides understand the strengths and weaknesses of their positions.

Can I sue if I don't have a written contract?

Yes, oral contracts are generally enforceable in New York, with some exceptions (contracts that must be in writing under the Statute of Frauds include real estate deals, agreements that can't be performed within one year, and contracts for goods over $500 under the UCC). But proving the terms of an oral agreement is much harder than pointing to a signed document.

Strategic Questions

Is it worth suing for breach of contract?

Honest answer: it depends on the math. Calculate your realistic recovery, subtract likely legal fees, factor in the time value of money over an 18-36 month case, and assess whether the defendant can actually pay a judgment. Sometimes litigation makes sense. Sometimes a negotiated settlement—or walking away—is the smarter business decision.

What if the other party claims I breached first?

They might have a defense. Under New York law, a party that materially breaches a contract can't recover damages for the other party's subsequent breach. This often becomes a "he said, she said" about who breached first and whether the breach was material. Document everything from the start of any contract dispute.

Can I get an injunction to stop ongoing harm while my case is pending?

Possibly. A "preliminary injunction" can stop the other party from taking harmful actions while the case proceeds. But you'll need to show irreparable harm that can't be fixed with money damages, a likelihood of success on the merits, and that the balance of hardships favors you. It's a high bar, and the motion itself costs money to bring.

When You Need an Attorney

Contract disputes involving significant money—generally anything over $25,000—benefit from legal representation. An experienced business litigation attorney can:

• Evaluate whether your damages are actually recoverable under New York law

• Identify proof problems early, before you've invested heavily in litigation

• Calculate realistic recovery expectations

• Navigate the procedural requirements of NYC courts

• Negotiate settlements from a position of knowledge

  
  

At KLG Law, we represent businesses across Brooklyn, Queens, Manhattan, and Staten Island in contract disputes. We'll give you an honest assessment of your case—including whether litigation makes economic sense—before you commit to anything.

Ready to discuss your contract dispute?

Call us at (212) 203-2082 or contact us online for a consultation. We'll review your situation and help you understand your options.