Which type of damages is intended to punish the breaching party?

The correct choice, punitive damages, refers to a category of damages specifically designed to punish the party that breaches a contract and deter similar actions in the future. Unlike compensatory damages that are meant solely to compensate the injured party for their losses, punitive damages go a step further. They focus on the misconduct of the breaching party, serving as a form of legal reproach.

Punitive damages are typically assessed in cases where the breaching party has acted with gross negligence, willful misconduct, or fraud. The aim is not only to penalize the wrongdoer but also to signal to others that such behavior will not be tolerated under the law. It's important to note that punitive damages are awarded in addition to any compensatory damages, making them a critical aspect of certain legal claims.

Nominal damages, compensatory damages, and liquidated damages serve different functions, focusing on reparation or predefined compensation rather than punishment. Understanding the distinct role of punitive damages helps clarify their importance in the legal landscape.