Cost and loss avoided refers to which concept?

• A. A measure of punitive damages.
• B. Costs saved and resources reallocated by the non-breaching party are subtracted from the award.
• C. The difference between contract price and market price.
• D. The value of the breach to the non-breaching party is added to the award.

Answer: (B)

In calculating contract damages, the aim is to put the non-breaching party in the position they would have been in had performance occurred. A key part of that calculation is subtracting costs saved or losses avoided due to the breach from the damages awarded. If the non-breaching party avoids certain costs or reallocates resources because the contract wasn’t performed, those savings reduce the amount the breaching party must pay. For example, if pursuing performance would have cost you money you don’t actually incur because the contract is breached, that saved amount lowers the damages.

This is the best answer because it directly reflects how damages are netted against what the non-breaching party saves by not performing. The other ideas don’t fit: punitive damages aren’t the measure in contract breach, the basic difference between contract price and market price is a damage measure in some contexts but doesn’t capture the subtraction of saved costs, and adding the value of the breach to the award would overcompensate the non-breaching party.