Compensation for damages - how to determine the amount?

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Many traded entrepreneurs have certainly encountered a situation where, after concluding a contract, the contractor did not comply with its terms, which caused the entrepreneur to suffer damage. In such a situation, he is entitled to compensation. However, what is a loss, how to determine its amount and how to calculate compensation for damage? The answer can be found in this article.

Compensation for damages - contractual and tort liability

In Polish civil law, we distinguish two types of compensation for damages, in other words, liability for damages: tort liability and contractual liability. Both are made if damage has been done. However, the sources of this damage, and thus liability, determine which type of liability we are dealing with.

Tort liability

Tort liability is regulated in Art. 415-449 of the Civil Code. and is liability for a tort (and therefore prohibited by a specific legal provision; the tort is therefore the source of this liability). We deal with it if one entity caused damage to another through a culpable specific action (e.g. one person beat another, damaged its property). As a result of this action, an obligation to redress the damage will arise between the perpetrator and the aggrieved party, and it is irrelevant whether these parties were previously bound by any other legal relationship.

Contractual liability

Contractual liability is regulated in Art. 471 et seq. Of the Civil Code and results from non-performance or improper performance of an obligation that arose earlier between the parties as a result of concluding a legal transaction (e.g. we will be dealing with contractual liability in the event of damage suffered as a result of failure to comply with the contract that the parties previously signed).

Tort and contractual liability - examples

Using examples, we will deal with tort liability, for example, if the driver of a car hits a pedestrian in the lanes, which causes damage to his health or property (the pedestrian will then be able to demand compensation from the driver for damages). On the other hand, we will deal with contractual liability if the owner of the store signs a contract with the supplier, as a result of which the supplier undertakes to deliver the goods on a daily basis, but does not perform these deliveries - the entrepreneur will be able to claim compensation for damages, i.e. demand from the supplier compensation for failure to perform the terms of the contract.

It is worth emphasizing that the liability for damages, resulting from the provisions of civil law, often occurs next to the liability for damages under the criminal law. For example, if a drunk driver hits a pedestrian, he will be liable both criminally (for driving under the influence of alcohol and for bodily harm) and civil liability if the pedestrian decides to bring an action against him for the damage suffered. Contrary to criminal cases, which are most often initiated ex officio (depending on the type of crime committed), civil cases can be initiated only at the request of the injured party, so it depends on him whether he will seek compensation for damages before the court or not.

Too bad - definition

The concept of damage in civil law is not defined in the Act. It is assumed that it is a detriment to the legally protected goods or interests of the aggrieved party, which he suffered against his will (as opposed to detriment that he suffers as a result of his own actions - e.g. getting rid of things).

It is possible to distinguish between pecuniary and non-pecuniary damage. Pecuniary damage is a loss of property with financial value, while non-pecuniary damage is a loss consisting in negative sensations, physical or mental suffering. In the case of non-pecuniary damage, compensation will be due if personal rights (e.g. health) have been violated - the damage is then called a loss. In the case of property damage, negative events may directly affect the property of the aggrieved party or the aggrieved party. Therefore, among property damage, we can distinguish damage to property or personal injury (i.e. personal injury may be both pecuniary and non-pecuniary).

Personal damage will occur in the event of damage to the injured person's property related to him (e.g. lost earnings as a result of an accident - the injured person is unable to work), non-pecuniary damage to the person (otherwise harm) will not be related to the injured person's property (i.e. e.g. harm in the form of pain due to injury to the body). We deal with damage to property in the event of damage to the property (e.g. a car as a result of an accident).

Pecuniary damage

The basic provision that regulates the issues of liability for the material damage suffered is Art. 361 of the Civil Code:

Art 361§ 1 The person liable for compensation shall be liable only for the normal consequences of the act or omission from which the damage resulted.

§ 2. Within the above limits, in the absence of a different provision of the act or contract, compensation for damage includes losses that the aggrieved party has suffered, and the benefits that could have been achieved if the damage had not been done to him.

It follows from the above provision that the aggrieved party may claim compensation for damages, which will include:

  • the losses he has suffered (the loss is a real loss of property of the aggrieved party),

  • the benefits that could have been achieved if the damage had not been done (lost profits are assets that the aggrieved party expected to achieve but did not manage to achieve as a result of the damage caused to him, which prevented him from obtaining the benefits - this is all that would have entered the aggrieved party's property if it had not been done damage, e.g. loss of earnings, loss of expected profit from a commercial transaction).

The obligation to redress the damage, pursuant to Art. 361 §1 of the Civil Code, arises if there is a causal link between the event and the damage. This means that the aggrieved party has to prove the fact of the losses suffered and the fact that the losses were suffered as a result of the specific event that caused the damage. Moreover, if he is demanding the reimbursement of lost profits, he should also prove their connection with the event - that is, prove the probability that he would have obtained the lost benefit had the event not caused the loss not occurred.

Pursuant to Art. 362 of the Civil Code, if the aggrieved party contributed to the occurrence or increase of the damage, the obligation to repair it is appropriately reduced according to the circumstances, and in particular to the degree of fault of both parties.

The issue of redressing the damage is regulated by Art. 363 of the Civil Code:

Art 363§ 1 Compensation for the damage should take place, at the option of the aggrieved party, either by restoring the previous state or by paying an appropriate amount of money. However, if the restoration of the previous condition was impossible or if it would entail excessive difficulties or costs for the obligated party, the injured party's claim is limited to the payment in money.

§ 2. If the compensation is to be made in money, the amount of compensation should be determined according to the prices on the date of determining the compensation, unless special circumstances require the basis for prices existing at another time.

Therefore, the damage may be repaired either by restoring the previous condition or by paying an appropriate amount of money, of which the payment of the amount of money is obligatory if the restoration of the previous condition is impossible. Of course, it should be remembered that if we are dealing with contractual liability and the parties in the contract have agreed other conditions for repairing the damage, the provisions of the contract will apply.

Non-pecuniary damage

Compensation for non-pecuniary damage, otherwise known as harm, is regulated on the basis of such provisions of the Civil Code as: Art. 24 (concerning infringement of personal rights), art. 445 (regarding compensation for harm suffered in the case of tort liability), art. 448 (concerning the infringement of personal rights in the case of tort liability).

Non-pecuniary damage, as indicated above, includes all negative effects on the physical and mental condition of the injured person, which do not affect their property.

Non-pecuniary damage is everything that negatively affects the victim's well-being, health, quality of life, i.e. all physical (pain) and mental suffering (e.g. mourning for a deceased family member). Non-pecuniary damage may occur independently or simultaneously with pecuniary damage (so the aggrieved party may then apply both for compensation for pecuniary damage and compensation for non-pecuniary damage).

Example 1.

The victim, being a passenger of the car, suffered an accident caused by the driver of the car. In this accident, a relative of the victim died. In addition, the laptop that the victim had with him was destroyed. In this situation, the aggrieved party may claim from the driver of the car compensation for property damage to property (damaged laptop), personal injury (as a result of bodily injury, the injured person was unable to work, so he lost part of his earnings) and compensation for non-pecuniary damage to the person (damage to health). victim, pain after the loss of a loved one, trauma after an accident).

Compensation for non-pecuniary damage occurs only in the case of tort liability. As a rule, the aggrieved party cannot claim compensation for non-pecuniary damage in the case of contractual liability (the exception is the coincidence of tort and contractual liability - Art. 443 of the Civil Code).

Compensation for damage in the event of property damage - how to determine the amount?

Determining the existence and amount of damage is made using the differential method, according to which the damage will be the difference between the actual condition of the victim's property at the time the determination was made and the hypothetical condition that would have existed if the event giving rise to the damage had not occurred. Determining the amount of damage is influenced not only by the direct consequences for individual goods (e.g. destruction of a flat) - i.e. loss, but also further consequences (e.g. inability to live in this flat) - i.e. lost profits.

Determining the actual state (i.e. loss) is relatively simple, while determining the hypothetical state (i.e. loss of profit) may be more difficult. First of all, it should be determined whether the occurrence of certain consequences in a given situation was possible, taking into account the most likely course of events (this will be a confirmation of the fact that the given event had a direct impact on the occurrence of the damage). It should also be determined whether the aggrieved party (taking into account his standard activity and concern for his own interests) could in fact obtain an advantage if the damage did not occur. Therefore, a high degree of probability of loss of benefits should be demonstrated (however, proof of certainty of occurrence is not necessary). It also takes into account the circumstances that occurred after the damage occurred, but were beyond its control (e.g. circumstances of force majeure such as fire, hurricane, or other, which, even if the event causing the damage did not take place, would still benefit from It did not arrive).

Example 2.

Entrepreneur A and entrepreneur B concluded a contract, as a result of which entrepreneur B undertook to deliver the goods to entrepreneur A every day (the value of the goods delivered daily was PLN 500), which he was selling in his store. Entrepreneur B did not deliver the goods for 7 days. The value of the goods that entrepreneur B was supposed to deliver for 7 days was therefore PLN 3,500 - this is a loss for entrepreneur A. When determining the lost profits, one should take into account:

  • hypothetical profit that entrepreneur A would obtain from the sale of undelivered goods - to calculate this profit, you can, for example, check what average weekly profit entrepreneur A made on the sale of such goods in the previous weeks,
  • whether the sale of the goods would have happened at all if they had been delivered (it may turn out, for example, that in the previous weeks the goods were not purchased at all, or due to force majeure the store was not open at all during this period, so for sale and that would not happen).

Entrepreneur A may, therefore, demand compensation from entrepreneur B for damages in the amount of PLN 3,500 (compensation for loss) and any possible damages, estimated in the above-mentioned a way of lost profits.

Pursuant to Art. 363 § 3, compensation for damage in money should be determined according to the prices on the date of determining the compensation, unless special circumstances require that the prices existing at another time be used as the basis.

As a rule, the interests of the aggrieved party should be taken into account. Therefore, if the aggrieved party has already purchased the goods or services, their cost should be taken into account if it corresponds to the prices in the local market. Taking into account the prices from the date of establishing compensation for the damage is aimed at enabling the injured party to purchase the same goods or services at the time when he receives compensation (so if it turns out that the price of the goods has increased since the damage occurred, the injured party should receive compensation in the amount of the current price of these goods, not the price before the damage occurred).

It should be remembered that the amount of compensation for damages (as well as whether the aggrieved party will be able to claim lost profits) is also influenced by such factors as:

  • whether the aggrieved party contributed to the loss,
  • whether the aggrieved party incurred expenses aimed at minimizing the damage (e.g. knowing that the goods would not be delivered to him, he bought it on his own from another entrepreneur),
  • whether the aggrieved party incurred expenses to determine the amount of compensation (e.g. turned to an expert) - these costs should be included in the compensation,
  • what were the other circumstances of the case (which would either entitle to higher compensation or to its reduction).

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Compensation for damages - stipulating a contractual penalty for contractual obligations

The parties may stipulate in the contract that if one of them fails to comply with the provisions of the contract or performs it improperly, the other will be entitled to demand the payment of a specified amount as a contractual penalty. It should be emphasized that a contractual penalty is possible only in the case of non-pecuniary obligations (a pecuniary obligation is one in which the debtor's performance is defined as a monetary amount, e.g. sale price, remuneration under a contract for a specific task; a non-pecuniary obligation is one in which the debtor's performance is not determined by a monetary amount, e.g. handing over an item). The reservation of a contractual penalty is convenient for the parties, because they do not have to pursue liability for damages in court, they save time and are paid a specific amount as compensation (so it does not matter whether the perpetrator was at fault or not - failure to perform the contract alone entitles them to demand a penalty contractual). As a rule, if the parties decide to impose a contractual penalty, the institution of compensation for damages cannot be pursued in court. However, in the contract, the parties may decide that if the value of the damage suffered is higher than the amount of the contractual penalty, they will be entitled to claim damages exceeding the amount of the contractual penalty (Article 484 § 1).