How are damages assessed in the context of a contract?

Damages in the context of a contract are assessed based on the principle of foreseeability. This means that when a contract is formed, both parties should have a reasonable expectation of what damages would arise from a breach. The intent is to put the injured party in the position they would have been in if the contract was fulfilled as agreed.

For damages to be recoverable, they must be reasonably foreseeable at the time the contract was made. This concept is rooted in contract law and is illustrated in cases where damages resulting from a breach are only recoverable if the breaching party could have anticipated these damages. When both parties enter into a contract, they are presumed to understand the potential outcomes and risks associated with non-performance.

In contrast, the other options do not accurately reflect the principles of damage assessment. For instance, attributing sole responsibility for damages to one party does not consider shared liabilities or unforeseeable consequences. The assertion that damages must be reduced by future income overlooks the obligation of the injured party to mitigate their losses. Moreover, suggesting that damages are fixed percentages of contract values fails to account for the unique circumstances and specific losses each particular breach may entail.