Which term describes a payment awarded by a court to reimburse a victim for actual harm?

• A. Consequential damages
• B. Compensatory damages
• C. Punitive damages (exemplary damages)
• D. Extracontractual damages

Answer: (B)

Compensatory damages are designed to make the injured party whole by reimbursing actual losses. They measure and pay for the real harms suffered, such as medical bills, lost wages, and property damage, and can also encompass non-economic harms in the broader sense of restoring the plaintiff to their pre-injury position. This focus on restitution for actual harm is why this term is the best fit. Punitive damages, by contrast, are meant to punish the wrongdoer and go beyond the person’s actual losses. Consequential damages refer to losses that flow from the breach as a consequence of the harm and are still ultimately tied to the injury, but the fundamental purpose of compensatory damages remains restoring the victim to their prior financial state. Extracontractual damages describe damages arising outside a contract, such as tort claims, but the essential idea here is reimbursement for actual harm, which is the hallmark of compensatory damages.