Damages which are imposed as punishment on the breaching party are called

Damages that are imposed as a form of punishment on the breaching party are known as exemplary damages. These damages go beyond merely compensating the non-breaching party for their loss and instead serve to punish the breaching party for their wrongful conduct and discourage similar actions in the future. Exemplary damages are often applicable in cases where the breach involves malice, fraud, or gross negligence, highlighting the need for accountability in contractual relationships.

In contrast, compensatory damages are intended to reimburse the injured party for their direct losses. Liquidated damages are pre-determined amounts set forth in the contract to be paid in the event of a breach, designed to provide certainty rather than punitive measures. Nominal damages represent a small sum awarded in recognition of a legal violation when no actual financial loss has occurred, rather than serving a punitive purpose. Each of these types of damages serves a different role within the framework of contract law, clarifying the unique function of exemplary damages as a punitive measure.